pot of honey

A Sweet Stock

Investing in the stock market can often be daunting. Where do I start? What do I invest in? How do I invest? Aside from the obvious capital requirements, one of the biggest barriers to investing at a young age is a lack of education in the financial market. Investing doesn’t require large amounts of money. You can trade easily with parcels of $500, but young people often don’t have the financial ‘know how’ to decide what to invest in. This series will take you through a ‘hot pick’ in the Australian Stock Exchange (ASX) and guide you through some basic understanding as to why it’ll be a good buy.

                                           

This week, we’re looking at Capilano Honey. You might recognise the brand from Woolworths or Coles – it’s the famous honey brand featuring a bright yellow label and a superhero bee. I bought into Capilano late last year with the aim of holding for the next three to five years. It’s slowly been declining in value over the past 12 months, but it’s started to pick back up again in the last four weeks, which is a perfect time to buy in and ride the wave.

As the name states, they sell honey – marketed as ‘Australia’s Favourite Honey’. Their primary stock offering is a plain Australian honey, but in recent years they have launched their ‘Beeotic’ honey – a probiotic honey and a premium Manuka honey. Both products should aid in the increase in stock prices over the next 12 months. Capilano has remained profitable over the years, with a consistent, significant percentage of revenue coming from domestic sales – indicating its value to Australian consumers and its market share domestically. One of the main attractions of Capilano as an investment is that their ‘product’ never goes on offer. Thus, there is little waste and inefficiency in their distribution and supply. Additionally, Australia is one of the most attractive honey producers to overseas markets (especially in Asia) due to our highly-regulated market and variety in bee species –providing room for overseas growth, leading to an increase in revenue.

However, Capilano’s risks come from the nature of honey. Production is limited by the weather, with climate change being one of the biggest threats to the company. However, as weather issues will affect both the company and their competitors equally, Capilano’s scale, size and expertise will allow it to ‘weather the storm’. This means it will have the capacity to speak and address climate change concerns faster than their competitors. In preparation for this, Capilano has started to increase its honey stockpile each year to take advantage of a ‘honey crisis’. This is aided by the fact that honey itself doesn’t expire. The directors of the company have formed strong relationships with farmers, working cooperatively to prepare for the rising temperatures in Australia as well as ensure the quality of their honey.

Capilano would be a sweet start to anyone looking to begin trading on the ASX. It’s a long-term investment that should hopefully pay off in the next three to five years.  

 

Albert Patajo is a final year Law/Science student currently writing his Honours thesis in Law. He has a small but growing portfolio spread across the ASX and other markets. If you want to learn more, he is more than happy to help other students start their journey in the ‘stock market’.