Chicken and egg story

Inflation seems to be on everyone's lips nowadays. Not because it is fashionable to talk about inflation but because its hurting everyone quite bad as soon as you venture into the market. On one of my recent visits it just occurred to me that amidst all this price rise if we could find a company which was benefitting we could possibly hedge the pinch to our pockets, (i.e., the increase in price of daily food would be offset by the increase in the share price of the company gaining from the inflation)

Hence, I put on my thinking cap to scout for companies which would benefit. I started trying to find companies which were producing and selling onions, garlic or tomatoes or other pricey vegetables. Soon I realised that my efforts were in vain.

However, a few days later whilst I was dining out at KFC I got the company I was looking for. It was companies engaged in the poultry sector. I tried verifying at the market (Eastern India) and realised that the prices of eggs and chicken too had shot through the roof. An average of 33% rise whilst the fodder price would not have increased to the same extent. However this was lot less than what had happened to the prices of vegetables. Hence I am sure the consumption of meat products must have substituted to some extent the usage of vegetables.

Again we add to this the fact that the cold has been particularly severe this year and the consumption of meat products go up quite a lot during winters you will realise what I am getting at.

Volume increase + price increase+ not much increase in price of input raw materials (Ideal combination for profit growth)

And the companies are

1) Venkys
2) Srinivasa Hatceries
3) Simran farms (My favorite as it has the potential to double form current levels of Rs 44 odd)

All of these have the potential to give atleast about 50% gains after the results come out. If you think my reasoning is good enough go for it guys. However, if you think my reasoning is flawed do let me know

Till my next post happy investing