Writing about BRF (BRFS) in May of 2021, I said that the shares of this Brazilian poultry and processed food producer were a borderline call over the near-term due to margin pressure, but that the long-term potential of its self-help program kept me at an overall “Buy”. Since then, those margin pressures have intensified even more than I expected, and the ADRs have lost almost 30% of their value.
The long-term value and potential are still there, but it’s going to take literally years for the improvements to manifest. That’s a long time to wait, and a lot can go wrong in the meantime – including the current set-up of flattish prices with still-high costs. Still, I like what the company has already accomplished in the pet food space and its ongoing plans for more localization in key markets like Turkey/Mideast and Asia.
With a fair value range of around $4.50 to $5.25 for the ADRs, very patient investors willing to accept weaker near-term results may yet see enough reward down the line to make the holding period worthwhile.
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