Hogs Get Slaughtered

As the biggest winning stocks and sectors of the last few years turn on their owners and bleed them with drawdowns of between 20 and 50 percent, it has been more than fitting for market participants to invoke that most famous of trader sayings this spring: “Bulls make money, bears make money, pigs get slaughtered.”

This sing-song-y phrase has long been used as an admonition of sorts against staying with a winning trade for too long or betting too heavily, which is precisely what so many have done with margin debt at record highs and some areas of the market trading at valuations unseen since the turn of the current century.

And now we get the IPO filing for Chinese-American pork producer WH Holdings. If there’s a more perfect metaphor for the current doings in our stock market than the WH Holdings IPO, I am not aware of it…

Chinese pork company WH Group filed its IPO prospectus on the Hong Kong Exchange this morning. The sausage giant, which paid $4.7 billion to acquire U.S. pork producer Smithfield Foods Inc last year, is seeking to raise up to $5.3 billion. Its prospectus offers a meaty sampling of all you ever wanted to know about the pork business but were afraid to ask. Some takeaways:

The U.S. is really efficient at growing hogs. According to a WH-commissioned study, U.S. hogs were approximately 40% cheaper than Chinese hogs between 2010 and 2012. That’s due to a range of factors: consolidation, technology–particularly in terms of litter rates–and feed prices. The average PRC corn price was 1.5 times that in the U.S. over the same time period, according to the study.

Not only are we really efficient at producing hogs in the US, our stock market can be highly efficient at slaughtering them. Even if it does take awhile to get around to it.

Oink oink.


WH Group’s IPO Prospectus: How the Sausage Gets Made (MoneyBeat)




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