Wall Street goes bearish over bird flu and mad cow disease
By MATT KRANTZ
USA Today
The looming threat of mad cow disease and bird flu isn't just making diners nervous. It's giving investors ingestion, too.
Sanderson Farms, a chicken processor, has lost 33 percent of its value this year and is 58 percent off its 52-week high. Tyson, which processes mainly beef and chicken, has sunk 22 percent this year.
Meanwhile, the other white meat is winning. Shares of Bob Evans, best known for its pork sausage, have rallied 28 percent this year and are 2 percent shy of a 52-week high. Premium Standard Farms, a pork seller that went public last year, is up 13 percent in 2006.
While concerns about beef and chicken have been floating for months, they hit a higher level last week. The Agriculture Department said a cow in Alabama was found to be infected with mad cow disease, and government officials said the United States is preparing for bird flu.
Investors' concern is another case of panic winning over logic, analysts say. "It's more perception than anything else," says Thomas Morabito, an analyst at Susquehanna Financial.
Investors should be careful in trying to profit from the meat-disease panic for several reasons:
That was a bad move, though. Less than a year later, Wendy's and Taco Bell operator Yum Brands said mad cow fears didn't scare away customers.
Investors who bailed out of Wendy's on May 20, 2003, missed out on a 37 percent rally in the shares through the end the year.
Some analysts say the recent declines have put the shares on sale. Joseph Agnese, stock analyst at Standard & Poor's, rated Tyson a buy in his most recent report, largely based on valuation. Tyson shares rose 20 cents to $13.26 on Tuesday as CEO John Tyson said the company won't lose money even though chicken exports have been hit.
The United States is not going vegan. "People will still buy beef, pork and chicken," Morabito says.
