Buy Agfeed Industries Inc. (FEED): FEED is engaged in the animal nutrition and commercial hog production business primarily in China. The stock rose 23.8% during the week, and it is down 38.1% YTD. This is back-to-back over a 20.5% increase in the prior week ending July 15th.
FEED trades at a forward 4-5 P/E while revenues are up strongly, up to $93 million in the latest reported March 2011 quarter which is a 100% increase year-over-year. Unlike other China small-cap companies plagued about fraud allegations regarding even the existence of their basic operations, FEED has a U.S. subsidiary M2P2 LLP that is a key supplier to Hormel Foods Co. (HRL) and is one of the largest pork producers in the U.S., with an annual production capacity of 1.3 million hogs. Only one analyst, Rodman & Renshaw, currently covers FEED; it has a Strong Buy rating and a $3.50 target on the stock, well above current price in the $1.80s. We first recommended buying FEED last week in the $1.40s, and reiterate the buy, but with the price up significantly, we would recommend buying in stages and on dips, taking advantage of any temporary weakness in the stock.