The short-term overhang on Olam’s shares pending the release of short-seller Muddy Waters’ research report could present bargain-hunting opportunities, CIMB says.
“We believe Olam will be able to ride out the storm. Muddy Waters’ track record is spotted with hits and misses. History suggests that bargain-hunting opportunities exist when stocks plunge on the day Muddy Waters releases its reports.”
CIMB has a Trading Sell call with $1.59 target, premised on near-term uncertainties; it says Olam isn’t an outright Underperform as share-price weakness may be temporary. It doesn’t advocate building positions pending the report’s release, but if the stock drops on its publication, there could be bottom-fishing opportunities, it says.
“We advocate staying nimble for bargain-hunting,” it says. “This could be a risky trade, but the days following the release of Muddy Waters’ report on Olam could prove rewarding for the brave. After all, short-sellers will need to cover their positions. Furthermore, we cannot rule out the possibility of share buybacks by Olam.” The stock is down 2% at $1.65.
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