NEW YORK ( TheStreet) -- China agriculture stocks, AgFeed Industries (FEED), Origin Agritech (SEED), American Dairy (ADY) and China Green Agriculture (CGA) have all witnessed a significant build up in short interest and a sharp correction in stock prices since April.
AgFeed Industries is trading at 52-week lows of $3.30, while Origin Agritech has lost 22% in the last one month. American Dairy has lost 15% and China Green Agriculture has declined 21% in the last one month.
In comparison, both Shanghai composite index and S&P 500 index have lost 14% and 8%, respectively during the same
The recent quarterly results were not particularly strong, falling short of lofty analyst expectations. Nevertheless, we reckon these stocks have been oversold leading to an attractive buying opportunity .An attractive price-to-earnings ratio, possible short covering once these stocks start recovering on inexpensive valuations coupled with a continued bullish sentiment among analysts could lead to an upsurge in prices. The short interest build up on these stocks recently is rather amazing and is one of the highest across all U.S. listed China stocks. As a percentage of float, short interest for AgFeed Industries, Origin Agritech, American Dairy and China Green Agriculture is 23.57%, 26.94%, 22.86% and 21.20%, respectively. AgFeed, American Dairy and China Green Agriculture are trading at attractive forward PEs of 13.3, 16.3 and 12.1, respectively.
Recent Quarterly PerformanceAgFeed Industries, a U.S. based food processing company with operations in China, reported a revenue growth of 58.1% to $52.9 million during the first quarter of 2010 driven by an expanding market share in its feed business and the production of its hog farm. However, the company's earnings came in below analyst estimates. The company reported earnings of 2 cents per share compared to consensus estimate of 11 cents per share. This is attributed to the fact that cost of goods sold increased 68.5% to $46.5 million, thereby contracting gross margin by 541 basis points to 11.95%.
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