LONG 1k shares of $DOLE @ $8.60
DOLE stock showing bullish trend change signals here at $8.60.. Technical analysis:
Bullish RSI divergence showing with Momentum oscillator buried and curling up from almost record lows on weekly chart.. inverse h&s bottom $8.60/$8.42/$8.60 best seen on hourly chart.. However a possible $8.38 washout is likely this week to test $8.42 double bottom and be the final shake out of weak hands that have accumulated here & grown impatient with the lack of stock price correlation to
FDP (both companies very similar). Mean reversion to FDP suggests DOLE shares to rally to $13-$15 even with a FDP pullback. There is no reason for the price disconnect except to squeeze the massive put to call ratio FDP has versus DOLE, but a continued “shaking of the tree” for cheap shares as long as possible into July seems the more likely reason price has not yet caught up.Fundamental analysis:
Dole PLC P/B ratio of .74 & P/S ratio of .11 suggests very extreme undervaluation. DOLE also has a lot of negative news priced in like the value-added salad recall impact and delayed price increases. The bear thesis of inflationary pressures is also over dramatic as Total assets has increased 147.5% to $4.7 billion following the acquisition. The Group now has a strategic and valuable asset base, including over 114,000 acres of owned land and other land holdings, over 160 distribution and manufacturing facilities, 75 packing houses, 12 cold storage facilities, 5 salad manufacturing all company owned. These all provide insulation from inflation.
Although DOLE has produced highly inconsistent earnings, the company should be back flirting with profitability as the price increases will have a greater impact this quarter. Risk reward remains favorable with a tangible book value of nearly $11 per share limiting downside. Dole PLC has it’s large debt (notes payable and long-term debt) refinanced in 2021 at favorable rates and has interest rate swaps in place to hedge which will reduce interest expense. A market beta of .54 also suggests less systematic market risk if general indices continue lower. Consumer preferences for fresh fruits and vegetables continue to grow as diets become healthier, global population growth expands, thus will always be in great demand. Barriers to entry are enormous and large customers demand the quality, reliability and scale provided by Dole PLC
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