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Jonathan Poland
Jonathan Poland
Articles (199)  | Author's Website |

Thoughts on Guru Bargain Stock Amira Nature Foods

A small-cap stock in Jim Simons' portfolio

July 14, 2017 | About:

Amira Nature Foods Ltd. (NYSE:ANFI) is a 102-year-old Indian food company, one of the largest producers and distributors of basmati rice in the world. India accounts for 70% of the world’s basmati rice, which is consumed by billions and where production in 2017 could be north of 20 million tonnes.

Jim Simons (Trades, Portfolio)’ Renaissance Technologies owns 57,900 shares, one of its smallest holdings, but the really interesting thing about the company is its financials. In the last six years, the company produced over $123 million ($4.52 per share) net on less than $10 million in capital spending. Secondly, the company’s balance sheet has positive net current assets, with $487 million in current assets (mostly accounts receivables and inventory) and $282 million in total liabilities.

News

In March, Amira announced it acquired a portfolio of packaged specialty rice brands, including Al Amir, Al Hakim, Bano, Dalia, Hanna and Shah Pari, from Euro Basmati GmbH in Germany. These brands are supposedly known for their authenticity and have primarily been sold in Germany.

Jefferies, the only top-tier analyst covering the stock, put out a bullish note on Amira last December with a price target of $13 per share, but it has not had any impact on its share price. In fact, the stock is lower now. Personally, I like that it is not covered heavily by Wall Street. The stock was beaten up by negative articles from short-selling upstart Prescience Point early in 2015, and the company has filed a defamation lawsuit against the analyst, who has since taken down its report and slowed its activity tremendously.

My take

I guess it is fair game to bring a suit against an analyst who thinks your stock price should be zero, but the company made some pretty good points at the time. In any case, the stock was not worth $13 at that point. It might be worth $10 now, but its priced at $6. If the company earns $4.50 a share in net income again over the next five years, using it to further build its book value and find more acquisitions and distribution channels for its products, the stock could double.

Be careful with the trade because the stock is very thinly traded. The average volume on a $6 price is 104,000 shares. It has a $237 million market cap and pays no dividends. Based on what I have seen from the balance sheet, however, as long as the financials are not fake and the company continues to be a leader in rice production and sales, the stock could get back to where it was in 2015.

Disclosure: I do not own Amira.

About the author:

Jonathan Poland
Thanks for reading! Since 2001, I've spent over 40,000 hours analyzing and forecasting the world's leading investments, helping investors significantly outperform the S&P 500. A few key distinctions kept coming to my attention: (1) position management matters as much as what stock you buy; and (2) buying a company's stock based on the timeframe until payback is a winning framework for both the long-term and short term gains; and (3) leveraging long term cash positions to make short term risk arbitrage trades is a practice that many top money managers engage in.

Visit Jonathan Poland's Website


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Comments

Praveen Chawla
Praveen Chawla premium member - 2 months ago

I looked into it a few months ago. Inspite of showing excellent earnings the company is not generating cash. Its seems to channel stuffing but is slow collecting cash. Does not inspire confidence. Days sales outstanding is ridiculous and inventory is going up.

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GuruFocus has detected 6 Warning Signs with Amira Nature Foods Ltd $ANFI.
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