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Cal-Maine Foods: Weighed Down By Inflation, But A Trade Emerges

Jan. 05, 2022 4:29 AM ETCal-Maine Foods, Inc. (CALM)15 Comments


  • This stock remains an incredible stock to trade, and we like entering for swings.
  • Short interest has risen.
  • Inflation is weighing on earnings power.
  • Dividend won't return until there is $21 million recovered in earnings.
  • We think pricing this year improves, but watch the hatch rate and the hen supply.
  • Looking for more investing ideas like this one? Get them exclusively at BAD BEAT Investing. Learn More »

Close up of a woman cracking an egg.

skynesher/E+ via Getty Images

Cal-Maine Foods (NASDAQ:CALM) is still a stock that we frequently trade, and is often asked about in our trading service. Here is the deal. Trading this stock is pretty much like trading an energy stock. Why? Energy stocks move

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Analyst’s Disclosure: I/we have a beneficial long position in the shares of CALM either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Comments (15)

blackcrk profile picture
Great article, thanks.

CALM is one of my favorite trading stocks. For several reasons.

1) It is a consumer staple, demand is not likely to drop to zero until the plant based egg becomes popular.

2) CALM management runs the company much like I would run it. It's a cyclical company. There is no way that CALM can predict with any kind of accuracy what it's costs will be and what it's gross revenues will be. It's not a company that can guarantee a dividend. So the 1/3rd of profits dividend policy is a great way to share the wealth when the wealth is there, and tighten up when it's not.

Now, I fully realize that one is not likely to make a lot of money by buying and holding CALM. The stock price goes up and down quite a bit over the course of a year or more as the various dynamics that affect costs and egg prices play out.

I get most of my profits from CALM by selling options. If CALM stock price drops to $37, I sell puts out a few months at strike of $32.50 or so. When the price gets high (like it has been for the last few months), I sell calls.

That's been working well for me since 2015.

I don't plan to change my approach until those plant based eggs change the paradigm.
Trader 611 profile picture
I bought puts a few weeks back. Expect the stock to explode higher after earnings. Still overbought.
blackcrk profile picture
@Trader 611

You were right about the stock exploding higher. Any insight into how the next quarter will finish?
Trader 611 profile picture
@blackcrk Haha, no idea! I don't know what I'm doing really. I bought puts on CALM, but was early and closed the position at small loss. Egg prices are high that's all I know and that should be a positive for CALM. Other than that, couldn't tell you. I just said that as joke cause I had puts lol
blackcrk profile picture
@Trader 611

I think egg prices are the biggest driver for CALM share price normally with feed prices also a large factor. But right now we have much higher costs of everything (including labor, another biggie) and risk of bird flu.
Calvin Ott profile picture
Bird flu

Atlanta, GA Mon. Mar 28, 2022 USDA Market News

Daily Southeast Region Eggs

Prices are 50 to 88 cents higher for Extra Large and Large, up 45 to 83
cents for Medium. The undertone is firm. Supplies are mixed, but mostly
moderate. Offerings are light. Retail and food service demand is moderate
to fairly good. Market activity is moderate to instances active. In the
Eastern region, breaking stock offerings are light for fairly good to good
demand. Light type fowl offerings are moderate to heavy; processing
schedules are normal to less than normal.


EXTRA LARGE 199.5-278 266-269
LARGE 195.5-275 261-264
MEDIUM 167.5-242 232-236
blackcrk profile picture
@Calvin Ott

Not sure if anyone here has a clear picture on how Bird Flu is affecting CALM. Looking for any thoughts on the subject.
Calvin Ott profile picture
@blackcrk per recent chicken and egg report ... table laying hens are down about 20m to just under 300m ... hatch was down ~15% so there were breeders put down ... the loss of breeders affects repopulation and the life cycle of a hen is about 55 weeks ... plus another 33 weeks if the hens are molted and have a 2nd lay ... so bird numbers will likely be lower than this pre A.I. event for about a year ... Dolph talks a bit about it in friday's BMO global presentation ... see CALM website ... my Q4 guess is $2 plus EPS even with the higher feed and other costs ... also the industry was in better shape supply / demand wise before this AI event compared to the 2015 AI situation ... industry has a huge challenge to transition about 100m more hens to cage free over the next four five years ... Dolf talks about this as well ... animal rights groups are "keeping a scorecard" ... so this transition to cage free will likely happen even if the customer doesn't want it ... pledges were made

blackcrk profile picture
@Calvin Ott

Thanks for your insight.
Trader 611 profile picture
How do you feel about it in the high $40's with an RSI of 75? Looks like a short to me. Fundamentally, they're not operating too well based on a first look at it.
Technically it looks overbought.
sirfatboy2014 profile picture
@Trader 611 Short term it could pull back but looking at a longer term chart it appears to have broken a seven year downtrend. The last three times it broke long-term downtrends it had huge moves to the upside (2003-2004, 2006-2008, and 2011-2015).
Trader 611 profile picture
@sirfatboy2014 well, the technicals are one thing. Fundamentals matter. I look at both. Could only get puts out to Aug22. 10% of the float is sold short already. Hmmmm.
sirfatboy2014 profile picture
@Trader 611 Long-term price action is king - many people were hyping up BABA every day on here saying it has "great fundamentals" despite the long-term uptrend being broken since it was $211.

Fundamentals can still be good when a stock is topping out and can be poor when a stock is just starting to move up.

“The reason for what a certain stock does today may not be known for two or three days, or weeks, or months. But what the dickens does that matter? Your business with the tape is now - not tomorrow! The reason can wait. But you must act instantly or be left.” - Jesse Livermore
Calvin Ott profile picture
Christmas egg prices were quite good and have remained fairly good as the industry starts to gear up for the Easter season.

I often make the argument that while feed costs may weigh heavy on margins in the short term ... long term i believe generic egg prices rise disproportionately to rising feed costs ... as egg producers can trim older layers quickly when their declining production does not cover feed and other farm costs.

If CALM, the largest egg producer in U.S. has been losing money the last few years .... think about the financial situation of some of the smaller producers ... then think about the huge facility investment to meet an increasing demand for cage free... more consolidation opportunities may present themselves

Quoting Beck - "things are going to change ... i can feel it "

This article touches on a twenty year analysis of feed v. egg prices:
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