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Before We Begin: Eggs are Growing in Popularity
For decades, consumption of eggs in the United States has been subdued by false accusations that dietary cholesterol will cause cardiovascular disease. However, with improvements in modern research methods, we know that "there is no relationship between eating eggs and an increased risk of cardiovascular disease”
Not only are eggs not bad for you, they are great for you. Eggs are packed with vitamins, minerals, healthy fats, and "contain the highest biological value for protein." Oh yeah, and they improve brain development, memory, and prevent blindness.
And they're sustainable and cheap, and sellers can charge you 6x the ticket price for swapping the label to cage free. The perfect
profit scheme food item.
Intro to Cal-Maine Foods (NASDAQ: CALM)
Cal-Maine Foods (NASDAQ: CALM) is the largest producer of fresh shell eggs in the United States. You have seen their eggs in the grocery store under the brand names:
They are the largest producers and marketers of shell eggs in the United States. They also sell the most cage-free eggs as well—the highest margin product in the industry—which now comprises 41% of their total shell egg revenue (sauce)
Not only does organic consumer demand mean higher margins for Cal-Maine Foods, but pressure from animal welfare groups is changing state law in favor of egg production behemoths such as Cal-Maine Foods and their insanely-profitable specialty-egg offerings:
California: All eggs sold must be cage free (went into effect January 1st, 2022)
Colorado: Battery cages phased out by 2025
Massachusetts: Battery cages banned by August 15, 2022
Michigan: Battery cages phased out by 2025
Nevada: Banning the in-state sale of products from battery cage systems by July 2022. Banning all battery cages by 2024.
Oregon: Banning the in-state sale of products from battery cage systems by 2024.
Rhode Island: Phasing out battery cages by 2026.
Utah: Phasing out battery cages by 2025.
Washington: Banning the in-state sale of products from battery cage systems by 2024.
For context about what this means for CALM, look no further than the stock price:
In the days following California's cage-free egg mandate the stock price jumped around 18% (January 1st 2022 go see for yourself)
Despite their domination of the egg industry, they are expanding relentlessly in order to capitalize on the cage-free egg opportunities that are coming down the pipeline:
strategic investments in MeadowCreek Foods and Southwest Specialty Eggs, LLC.
Cal-Maine Foods will acquire warehouse and distribution capability to expand Southwest Specialty Eggs' total customer base in the southern California, Arizona and Nevada markets.
$23 million capital project to expand its cage-free egg production at its Okeechobee, Fla., facility. The project will add capacity for approximately 400,000 cage-free hens and 210,000 pullets, he said.
Quotes are from this article--pretty interesting
Not to mention,
These Financials are Crazy
93.80% of shares held by institutions
Top Three Holders:
|Blackrock Inc.||6,151,490 shares||$227M|
|Nuance Investments||5,380,745 shares||$199M|
|Vanguard Group||4,268,498 shares||$154M|
110.13% of float held by Institutions
14.82% of shares held by insiders
1.2 Billion in assets
13% Q/Q Sales growth
In the past year, insiders have bought at 3x the rate of sellers. (sauce)
There's a crazy cup and handle pattern that has been forming over the past 320 days or so.
If we break above the 42.86 price level, you could expect at least a 20% price increase to approximately $51 according to the technicals. IV is also stupid low at the moment.
As of now, Cal-Maine Foods is the number one egg producer that stands to capitalize from the legislative changes occurring across the United States. Their steady westward expansion tells us they are trying to go from the biggest egg producer, to the only egg producer--and I love monopolies. Also they have a beta of -0.18, meaning as volatility in the market goes up, so do they. Kinda like a mini vix but it actually does something. Point being, people find eggs safe.
Positions (PLTR made me broke so heres all i got)
20x 2/18 $45C
2x 3/18 $45C
TL;DR: States are mandating cage-free eggs by law, it just so happens to be that this is the most profitable sector for egg manufacturers. The largest egg producer Cal-Maine Foods (CALM) is expanding rapidly, insiders and institutions love it, and 110% of the float is owned. A little move above $42.86 will send this flying. 🚀