So, I Made my Decision...

So... I made my decision and brought Fonterra. Well not Fonterra Co-op shares, but Fonterra Shareholder units, which non-farmers are allowed to buy. It was I thought, a low risk buy and leaves me with a bit of money in my account to make a few index ETF buys later in the year. I have one going out later this month; into the US 500, Total World and US Large Growth.

It is possible that Fonterra sells off next week, because of Trumps recent tariff 'Liberation Day', but they haven't so far. Most of Fonterra's milk solid exports go to China and wider Asia, so I don't think that they will be badly affected. Scott Technology put out a report yesterday to say that only 10% of their revenues will be affected by the tariffs. Because of providing investors with this information, their stock was the best performer on the NZX on Friday. I brought Fonterra after they sold off last week, due to investors no longer being entitled to the final dividend. As is usually the case, the stock was sold off by more than what the dividend was, so I thought that this was a situation I could take advantage of. Fonterra sold off their consumer brands last year, opting for a simpler and more efficient commodity exporting business. While their business has already seen benefits from this decision, I think that there are more positives to come. I think a more streamlined business will lead to greater profit margins in the long term.

Fonterra Co-op has a market cap of $7.5 billion, while the Shareholder's Fund has a cap of $600 million. The Fund provides a way for outside shareholder's (who are not dairy farmers) to invest in the company. And it also provides Fonterra with greater financial stability. The dominance of Fonterra across the global dairy market, is why I brought into the company. It provides good diversification to my overall portfolio, particularly as the stock operates independently to the rest of the stock market (since 92.5% of the company is owned by long-term farmer shareholders). With the stock markets being roiled by Trump's tariffs, this is a particularly valuable type of stock to own right now.