Calavo Growers ( $CVGW ) is a name that came up on a scan when I was doing some research late in 2017. Produce and prepared food packaging and distribution are certainly not the type of industries I look for when trying to find a stock that is ready to outperform. Yet Calavo Growers ( $CVGW ) stood out. The company was growing top-line revenues double digits with growth accelerating into 2018. Quite a bit of that growth can be attributed to the booming popularity of avocados, with Taco Tuesday and weekend Brunch helping to fuel demand. Avocados are also being touted by some as a superfood. Last, but not least, is all the new creative ways they are being used, including topically as a moisturizer. Needless to say, I became intrigued.
At some point I plan to outline my bull case on Calavo Growers ( $CVGW ) in 2018(you can already hear my thoughts on my Top 5 Webinar). I think it will trade over $115. But for now I just want to highlight one area that has me puzzled... the massive short interest.
Calavo Growers ( $CVGW ) short interest now stands at 5.3 million shares or 35% of the float. At the current average trading volume it would take over 30 days for the shorts to buy back the shares and cover their position. The short interest has actually doubled over the course of 2017:
Typically companies that become targets of short sellers have similar attributes: indebted, competitor concerns, leadership issues, slowing growth, ect. . Calavo Growers ( $CVGW ) has none of these attributes. I have been scratching my head trying to figure out why someone would be shorting this company. Were they betting on an Avocado shortage? The fires in California? The end of the Avocado toast craze? Did Mr. Beeks get the wrong crop report? Needless to say I am still trying to figure this out. The fear here is I am missing something. I am not naive enough to think i have all the answers so I am not ruling that out. But I am also not ruling out that someone has put their hand in the cookie jar, ate all the cookies, and now has to find a way to put them back in that jar. If that is the case, things could get very interesting on Calavo Growers ( $CVGW ).
Stay Tuned. Currently holding the Jan $85 calls and will likely be adding some more positions over the next few days.
-JB