TFS Corporation (ASX:TFC) as a company has got stronger over the past couple of years. However, after a rerate two years ago the share price has gone backwards. Normally, I only focus on company fundamentals and not worry about the share price. I know if I've done my homework well the share price will take care of itself.
I still have the same belief in TFC.
This quote from John Maynard Keynes is one of my favourites: "Markets can remain irrational longer than you can stay solvent". So here is me trying to explain what is most likely the market being irrational.
TFC are exposed to commodities. Their specific commodity is Indian Sandalwood. The market price of Indian sandalwood has gone up for the past 20 years. TFC are the only company that own a sustainable source of Indian Sandalwood. They also have long term agreements in place at $4,500/kg of oil (and more to follow), which is almost double the current market rate. And there it is, the word "oil".
Take a look at the next two graphs. The first is the short rate of TFC. That is, people that are betting the share price will go down. The second is the crude oil price.
It may be a coincidence, but there is definitely a corelation between the two graphs. Does the market actually see a relation between the two? I cannot see any reasonable explanation. However, 8% of the total number of shares have been shorted.
Those that believe in the TFC story have a great opportunity to buy some shares on sale. With the strong fundamentals, and the potential that any significant price movement will force people to cover short positions we could see a significant rerate in the not too distant future.
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