Yea, that’s an interesting one. I hadn’t seen his comments on that before. Appropriate now, too, being Thanksgiving. Pilgrims Pride, the US’s largest chicken producer on the verge of bankruptcy, now having received a third extension of a major creditor payment deadline, allowing their stock to skyrocket over the past 5 days, up by 240%! Damn. If I had bought a week ago I would definitely sell (half anyway, to ensure I at least broke even). Funny, when squid mentioned PPC on November 9 it was trading at 14. Now it’s at 1 (after the 240% gain).
If you’re hoping to make a big, quick short-term gain merely off fluctuation of the share price, based on investor sentiment, and don’t give a damn about the fundamentals or the long-term prospects, then it seems to me the cheaper the stock the better. A company trading at $100/share couldn’t possibly skyrocket 240% in 5 days. But with something trading at $1/share, upon sudden good news, it seems much more possible. At least that’s one of my crude amateur theories. Consequently, I prefer cheaper stocks, so long as the company doesn’t appear to be on the verge of bankruptcy.
PPC is definitely on the verge of bankruptcy. There may be a 50% chance you can double or triple your money overnight, but the alternative seems equally likely. It’s a gamble for sure. Not saying I wouldn’t do it. I might. But there’s humongous risk. When you check out the stock’s chart on a site such as Google Finance, be sure to read the news articles on the right side of the page. In this case you’ll learn:
[quote] Chicken producer Pilgrim’s Pride Corp (PPC.N: Quote, Profile, Research, Stock Buzz), which [color=#FF0000]has been losing money for nearly a year due to high feed costs and low meat prices[/color], faces [color=#FF0000]another debt deadline on Wednesday and analysts believe creditors may be less willing to grant a waiver as they did twice before.[/color]
[color=#FF0000]Without a waiver [/color]the company, which is the nation’s largest chicken producer with about 24 percent of the market, [color=#FF0000]could be forced to sell assets or file for bankruptcy protection[/color], according to analysts.
[color=#FF0000]In addition to Wednesday’s deadline, the Pittsburg, Texas-based company has a $25.7 million interest payment due next week.[/color] Both of those events may be troublesome, analysts said, considering Pilgrim’s Pride continues to be hurt by adverse market conditions.
“[color=#FF0000]I think they would not be given an extension,” [/color]said Rich Nelson, analysts at the agriculture research firm Allendale Inc said of Wednesday’s deadline. “Creditors are still looking at chicken prices, noting that chicken breast prices continue to falter.”
Another analyst, who asked to not be identified, predicted the chance of another waiver as “pretty low”.
. . . Nelson estimates there is a [color=#FF0000]60 percent chance the company will seek Chapter 11 bankruptcy [/color]protection or be forced to sell assets.
Earlier this month, Pilgrim’s Pride appointed William Snyder of CRG Partners as chief restructuring officer to help the company cut costs and improve long-term liquidity.
Stephens Inc analyst Farha Aslam said in a note last week that such a hiring “is [color=#FF0000]usually not a good sign” and put at 50/50 the chance that Pilgrim’s Pride will file for bankruptcy.[/color]
“We calculate that Pilgrim’s Pride [color=#FF0000]needs at least $200 million to $250 million to make it through the current downturn [/color]and make it to the other side of the chicken cycle,” Aslam said in the note.
“The size of the cash need is a critical issue. It is challenging for the banks, which are capital constrained themselves, to lend that sum of money to a company that has little control over pricing”. . . [/quote]
reuters.com/article/ousiv/id … AX20081124
That’s really somber stuff. But, one day after the above article, here’s why their stock skyrocketed in the past couple of days.
reuters.com/article/hotStock … ZF20081126
But, who knows if they’ll get further relief?
