Shares of Bellamy's Australia Ltd (ASX: BAL) are exploding again today. They're up another 9.2% to $9.61, giving them a total gain of 19.8% since the beginning of the month and 482% since the start of 2015.
Bellamy's has enjoyed incredible success since the company listed its shares on the ASX in August last year. The group reported a 153% increase in sales and a whopping 617% increase in net profit during the 2015 financial year, reflecting the demand and popularity for its products.
More recently however, it appears to be China's scrapping of its 35-year old one-child policy that has spurred demand for Bellamy's shares, combined with numerous media reports recently regarding the struggles local consumers have had in locating and purchasing baby formula products.
It is believed that many of the tins being purchased locally are actually then being sold to overseas customers, particularly those in China for the upcoming 'Singles Day' online shopping event, highlighting that demand is far exceeding supply right now. It's a good problem to have, but a problem that Bellamy's (and other producers) will need to resolve, nonetheless.
The excitement surrounding the baby formula market is clear. While Bellamy's share price is exploding, Blackmores Limited (ASX: BKL) recently broke through the $200 per share mark when it announced a partnership with Bega Cheese Ltd (ASX: BGA) to develop new baby formula products.
Notably, Bega Cheese also hit a new all-time high share price recently, while OnCard International Limited (ASX: ONC) is also soaring higher after it announced the acquisition of a Tasmania-based dairy producer. The shares rose as much as 49% this morning to 85 cents, after trading at just 30 cents recently.
Indeed, although there could still be gains to be made, investors should ensure that they do their due diligence on each company before they decide to buy shares, rather than simply buying into the hype.
