For BRF, There's Opportunity Amid The Adversity

When I last wrote about Brazilian food company BRF (NYSE:BRFS), I was concerned about the likelihood that the company's financial results were entering a rough period - squeezed between Brazil's weak domestic market, challenges in many export markets and spiking input prices. At the same time, BRF is seeing more competition at home and trying to navigate a tricky dual-brand strategy that could lead to market share and revenue pressures.

Those concerns have proven valid, but I'm surprised at the extent to which the market has been willing to look past it and toward the significant long-term opportunity BRF offers - I thought the shares were undervalued below $17 back in May, but I didn't expect a 24% move in the ADRs, nor the 13% move in the underlying local shares. Perhaps some of this is due to buyout rumors, particularly as Marfrig and JBS (OTCQX:JBSAY) haven't been great performers.

In any case, I still like BRF and this is still a stock that I hope to own for a long time. With a fair value in the $18-$19 range, but significant growth opportunities yet to be tapped, I think the shares hold some appeal but investors concerned about the risks and enhanced volatility of a Brazilian company may want a bigger discount before taking the plunge.

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For BRF, There's Opportunity Amid The Adversity