Monday, April 18, 2011

AgFeed Industries Inc. (NASDAQ: FEED) Q2 2011 Price Target

Recent price: 1.69$
P/E Ratio: -
3 Months Target Price: 2.50$

Company Description
AgFeed Industries, Inc. is engaged in the animal nutrition and commercial hog producing businesses in the People's Republic of China through its indirect operating subsidiaries. It operates in two segments: animal feed nutrition and hog production. The Company’s animal nutrition business consists of the research and development, manufacture, marketing and sale of additive premix (premix), concentrates and complete feed for use in the domestic animal husbandry markets, primarily for hog production in China. The Company operates five premix feed manufacturing facilities located in the cities of Nanchang, Shandong, Shanghai, Nanning and Hainan. It mainly produces hogs for slaughter and sells breeding stock.

Confidence Margins
Strong resistance $3.44 (+104%)
Light resistance $3.15 (+86%)
Light support $1.52 (-10%)
Strong support $1.45 (-14%)

Operations proved to be disappointing for AgFeed Industries. The company's stock was severely hit afterwards. those circumstances still provide investors with an opportunity to make great profits, mostly considering that the company is trading under book value per share.

Entry strategy
For the cautious investor:
Buy the stock for 1.75$ or less.

For the risk-taking trader:
The August 2011 2$ out-of-the-money call option contract seems to be the right position to take, they can be acquired for about 25$ per contract.

Exit Strategy
For the cautious investor:
Sell when the stock reaches 2.50$, or keep it until 3.25$ if you are more bullish in your own analysis.

For the risk-taking trader:
The contracts should be kept until the underlying reaches around 3$. This should provide a satisfactory return if the underlying reaches the target price as the contracts will get in the money.

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