Friday, April 24, 2009

Another one that got away from me: SMG

a.k.a. The Scotts Miracle-Gro Company. Among other garden and lawn care products, they make Miracle-Gro, a plant food for weekend gardeners.

This trade occurred to me last November, as the market was descending into a (then) new low: So, things are getting worse, this may not be a recession but depression. Food prices, despite huge drop in oil price and commodity prices, haven't gone down since the peak; if anything, they are creeping up. More people will start growing their own food. Since many of them will be first-time gardeners, they will at least initially rely on widely available plant food, Miracle-Gro. It sure works. My neighbor uses them on all his plants - from roses to vegetables...

So I checked SMG's chart. To my surprise, the low for the stock was October 10 at $18.12, and since then the stock was climbing up strong. I kept watching. November, December, January, February.. as the market went nowhere, the stock kept going up. Early February it was above $34.

Then, it crashed along with the market, but bounced off at 200-DMA and made a huge V-shape recovery as the market. Except it has outperformed the market by wide margin. While the market, as measured by S&P 500, is basically back to the beginning of February level, SMG is over 12% of the early February level.

I don't know how much more upside remains with this stock (all-time high is not that far away, at $48.36), and right now it's hitting the upper trend-channel. But I'll keep watching for now, as more people plant "recession gardens" across the country.

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