Name: Jonathan Day College/School: UVA Year: 2 nd Year Important Company Financial Data Ratios, financial statement data, projections, etc. - 1 yr. Target Estimate: 16.00 - Beta: 1.91-52 week range: 8.30-15.27 - Market Cap: 255.45m - P/E: 8.46 - EPS: 1.45 Thesis / Key Points - Omega Protein is a key player in an emerging health foods market - The firm harvests omega- 3 fish oils that have been proven to lower the risk of heart disease - This emerging market has shown an increasing demand for more omega- 3 supplements, with many of the bigger firms in the market leaning towards increased production to satisfy said demand - As we move forward in the modern age of organics, Omega Protein stands to capitalize on this increased demand for health supplements, both by recognizing the growth driver and devising an effective market strategy to increase the firm s production of raw fish oils - Omega Protein also boasts an impressive corporate structure, with CEO Bret Scholtes aggressively expanding the firm and maximizing efficiency along the way without sacrificing product quality - Omega Protein is North America s largest manufacturer of protein rich fishmeal and organic fish solubles, a market which it dominates with little difficulty - Omega Protein holds an competitive advantage in North America by being able to capitalize on lower shipping/transportation costs for its products, something competing international firms have difficulty accomplishing - In 2010, Omega Protein acquired dietary supplement producer Cyvnex Nutrition, which demonstrates the firm s ability to expand its operations past the raw materials side of the market - In 2011, Omega Protein expanded further by acquiring InCon Processing, a processor that uses molecular distillation technology. Once again, Omega has demonstrated that it is unafraid to partake in vertical integration and expand its overall processing capabilities - Omega Protein holds operations all over the country, with its headquarters in Houston, Texas, research facilities in Virginia and Houston, and processing plants in LA, MS, and IL. Multiple locations allow Omega to reach markets with greater efficiency and lower transportation costs - Omega has also been credited as a key community activist, boasting multiple accolades that represent the firm s undying efforts to insure sustainability and maintain a positive image in their operating regions - Omega employs high- tech harvesting, collection, and distribution methods, which ultimately increase the firm s overall efficiency in operations Misperception! The firm sells only a few selected products, and is not poised for substantial long- term gains! The firm has limited potential, due to its lack of a diverse product mix! The firm is simply not worth more than its current price; there are too many competitors in the nutritional supplement (fish- oil) market! Overfishing/overharvesting will affect the firm s ability to efficiently collect raw materials, with laws creating increasing difficulty for the business to operate within! The firm will ultimately be unable to sustain long- term projections; the nutritional supplement market is too stacked to compete in VAR! Customer Reviews: Fish- Oil Supplements! Yeah, my mom uses fish oil products all the time. They re very popular among our Asian family, many people we know take those capsules for heart health. - Jonathan Ledesma, UVA 16! My Dad takes those capsules. I m not big on it, but he seems to like it. My mom, too. - Max Frost, UVA 16! I take fish oil capsules. They help with heart health and other things, so why not? - Anish Randeria, UVA 16! A majority of people surveyed stated they either take fish oil, or know someone who has/currently takes fish oil capsules for health benefits. The trend among college students, young adults, and older individuals seems to be leaning towards taking fish oil capsules for added health benefits. Omega- 3 Fish Oil capsules are one of the most popular nutritional supplements currently being sold on Amazon.
How It Plays Out! MII takes a long position at 2% in OME (Omega Protein) and holds for a minimum of 18 months, after which the club decides whether or not to continue its position or sell the stock! MII will likely, given current trends, see an increase in both the overall price and value of the stock, assuming the company continues its heavy emphasis on research, expansion, and effective leadership! MII should, before making its final decision, take a look at shorting the stock. After extensive research, few signs point to this position being a profitable one, however it is always wise to look at both sides before initiating a position Risks / What Signs Would Indicate We Are Wrong?! OME fails to expand its research methods and becomes a victim of the over- fishing trend occurring in America! Other firms swoop in and out compete OME via some new competitive advantage! Stringent state laws are implemented to prevent over- harvesting of fish, in which case OME will suffer from loss of product! The overall trend of fish- oil popularity declines, thus strongly affecting a portion of OME s potential product mix! OME is unable to sustain its rapid expansion rate, and falls victim to poor corporate planning and over- extension of resources Signposts / Follow- Up! Overall stock price! EBITDA! Beta! Overall trends in the fish oil industry! Direction of supplements market! EPS! P/E Company Description Omega Protein Corporation (OME), a nutritional ingredient company, produces Omega-3 fish oil and specialty fishmeal products. The company operates in two segments, Animal Nutrition and Human Nutrition. The Animal Nutrition segment produces animal nutrition products, including fish meal products used as nutritional feed additives by animal feed manufacturers and commercial livestock producers; and crude fish oil for food producers and feed manufacturers. This segment also provides refined fish oil products that are used in food production, feed production, other industrial applications, and dietary supplements; and fish solubles for livestock and aquaculture feed manufacturers, as well as for use as an organic fertilizer. The Human Nutrition segment offers various compound products, including Omega-3 fish oils; and operates as an ingredient provider in the nutraceutical industry. The company sells its products in the United States, Mexico, Europe, Canada, Asia, South and Central America, and others. Omega Protein Corporation was founded in 1913 and is headquartered in Houston, Texas. (Yahoo Finance)