What had been a source of potential strength turned quickly to a weakness, as bovine and porcine genetics specialist Genus (GNS) found to its cost this year.
- Has wide moats in the semen world
- Very lean operation
- Caught up in poor emerging market sentiment
- End markets are notoriously inflexible
A rocky outlook for pork prices in China caused producers there to cut back their sow herd in response, thus reducing significantly the demand for Genus’ palette of porcine semen genetic material. The relative uncertainty over the outlook caused us to row back on our buy tip in September. However, with the share price rolling back significantly from its year highs, it looks like a good point to reassess the situation and ask whether Genus could now benefit from investors looking for a quality share with good relative value. Genus’ shares have never been cheap and, unless you were able to pick them up in the aftermath of the financial crisis, the premium the company has always attracted reflects its command of the vital, and technology demanding area of animal genetics.