Largest Land-Based Aquaculture Stock Breaking Large Pattern
Atlantic Sapphire ASA is incredibly beaten down, 80% from the highs only a year ago. Apparently they have a lot of debt due to expansion and demand for fresh salmon collapsed when restaurants and delis closed down during the pandemic. Now that the lockdowns are finally ending and now that Russian seafood is being sanctioned by the West, I think we'll see a return to huge gains with AASZF. They already reported a 300% increase in profit last quarter.
A number of reasons why salmon farming is being rotated into. Commodity prices are increasing, and salmon farming is a bit like offshore drilling where it takes years of invested capital and specialized development to set up a producing asset, and the commodity needs to be consumed quickly after production: demand collapse would (and did) lead to wasted supply. Like offshore drilling stocks, this niche sector is already outperforming by a large margin in 2022 (see charts of Mowi ASA or Austevoll Seafood, both up 30% this year).
Norwegian companies are set to profit the most during this cycle, since they control 2/3 of all salmon supply in both Europe and the Americas. Because of global climate and coastal geography, salmon can only be raised at the edge of the non-arctic Northern and Southern hemispheres (Norway, Chile, and Scotland being the world's best locations). Norwegian-owned salmon farms in Chile comprise the majority of salmon sold in supermarkets in the US. The same is true with farms in Norway which supply vendors in Europe.
There is an ESG component to this sector that is contributing to its growth in Western markets. Salmon contrasts beef, chicken, and pork in two important ways: a) by having the largest amount of protein output to food input, and b) lowest water consumption. Apparently businesses buy salmon or invest in salmon farms as a carbon offset.
*A quick note for non-European investors: in Europe salmon is not considered an expensive health food like it is for example in the US. Historically speaking, smoked fish was a food developed by peasants to preserve a cheap protein source during the winter. In most of Europe salmon is still consumed as a traditional working-class food item, and it is absolutely ubiquitous. Every town has a fish sandwich shop and a common sight is a vendor selling smoked fish out of the back of his truck in the parking lot of a supermarket (search "Fischwagen" on Google images to see what I mean).
By contrast in the US fresh wild-caught Alaskan salmon is sold in supermarkets such as Whole Foods for $20 a slab, giving the impression that it's out of reach to the average consumer. Chilean-raised salmon is often less than half that price.
A final point is that the Government Pension Fund of Norway --the largest of its kind in the world-- is designed to reinvest corporate profits back into the stock market, compounding financial gains during commodity supercycles. The majority of large cap companies on the Oslo Stock Exchange are in the energy, shipping, materials, and seafood sectors, which is unique for a Western European country (contrast with the DAX in Germany for example, which is majority manufacturing and finance). Major Norwegian stocks are all already outperforming significantly (for examples, see Golden Ocean Group $GOGL, Equinor $EQUN, and Norsk Hydro $NHYDY).
To summarize, this break out may be permanent.
A number of reasons why salmon farming is being rotated into. Commodity prices are increasing, and salmon farming is a bit like offshore drilling where it takes years of invested capital and specialized development to set up a producing asset, and the commodity needs to be consumed quickly after production: demand collapse would (and did) lead to wasted supply. Like offshore drilling stocks, this niche sector is already outperforming by a large margin in 2022 (see charts of Mowi ASA or Austevoll Seafood, both up 30% this year).
Norwegian companies are set to profit the most during this cycle, since they control 2/3 of all salmon supply in both Europe and the Americas. Because of global climate and coastal geography, salmon can only be raised at the edge of the non-arctic Northern and Southern hemispheres (Norway, Chile, and Scotland being the world's best locations). Norwegian-owned salmon farms in Chile comprise the majority of salmon sold in supermarkets in the US. The same is true with farms in Norway which supply vendors in Europe.
There is an ESG component to this sector that is contributing to its growth in Western markets. Salmon contrasts beef, chicken, and pork in two important ways: a) by having the largest amount of protein output to food input, and b) lowest water consumption. Apparently businesses buy salmon or invest in salmon farms as a carbon offset.
*A quick note for non-European investors: in Europe salmon is not considered an expensive health food like it is for example in the US. Historically speaking, smoked fish was a food developed by peasants to preserve a cheap protein source during the winter. In most of Europe salmon is still consumed as a traditional working-class food item, and it is absolutely ubiquitous. Every town has a fish sandwich shop and a common sight is a vendor selling smoked fish out of the back of his truck in the parking lot of a supermarket (search "Fischwagen" on Google images to see what I mean).
By contrast in the US fresh wild-caught Alaskan salmon is sold in supermarkets such as Whole Foods for $20 a slab, giving the impression that it's out of reach to the average consumer. Chilean-raised salmon is often less than half that price.
A final point is that the Government Pension Fund of Norway --the largest of its kind in the world-- is designed to reinvest corporate profits back into the stock market, compounding financial gains during commodity supercycles. The majority of large cap companies on the Oslo Stock Exchange are in the energy, shipping, materials, and seafood sectors, which is unique for a Western European country (contrast with the DAX in Germany for example, which is majority manufacturing and finance). Major Norwegian stocks are all already outperforming significantly (for examples, see Golden Ocean Group $GOGL, Equinor $EQUN, and Norsk Hydro $NHYDY).
To summarize, this break out may be permanent.