Have investors lost their appetite for Greencore?

Greencore ceo Patrick Coveney bought 50,000 shares on Friday giving the stock a much-needed boost. However, analysts are struggling to explain the recent stock weakness.

GREENCORE was the talk of the markets this week, with chatter only intensifying following a statement from the company reassuring investors there is no need to panic.

As brokers were tucking into their lunches on Friday, shares in the sandwich-maker had fallen a whopping 27pc since June, with the stock down around 16pc in the week. It took chief executive Patrick Coveney’s acquisition of 50,000 shares to spark a 5pc bounce on Friday afternoon.

But people are still trying to figure out what has caused the stock to go stale in recent weeks. Although there has not been an iota of bad news to cause the tumble, 20 million shares changed hands last Thursday, one of the company’s biggest-ever trading days.

Of the 11 analysts listed as covering the stock on Bloomberg, all have a buy rating for the food group and a target price of over £3.

The shares are now trading at just under £2. With a stunning 50pc upside there to be had (it would seem), why has the share price been on the slide? Market sources tell me that some short sellers have been on the scene for the past few months. But this doesn’t seem to be the sole cause of the stock’s fall.

Are there other reasons why investors have lost their appetite for Greencore? For one, some in the market believe that the UK will prove tricky in the medium term. Greencore is a huge player there but dependent on the supermarket chains, which squeeze suppliers like no other retailers, and leave no upside.

And consumer confidence may worsen there in the coming months and years, putting pressure on margins. Also, the impact of changed migration policies in the UK could leave Greencore’s processes — which depend heavily on hard-working, low-paid Eastern Europeans — under immense pressure.

And, despite Coveney’s convincing rationale for expanding massively in the US, some investors here remain cautious about the Irish food company’s ability to thrive in that market. With Aryzta’s US woes an all-too recent memory for food stock enthusiasts, those fears will hopefully prove to be unfounded. After putting some money where his mouth is, the ever-smooth Coveney will no doubt do his best to soothe worries at fullyear results in a month’s time.