Two of the best performers on the All Ordinaries index this week have been the Bellamy's Australia Ltd (ASX: BAL) share price and the Bubs Australia Ltd (ASX: BUB) share price.
Both infant formula companies have smashed the market this week with gains of 20% and 28%, respectively, at the time of writing.
Why have these shares raced higher?
Whilst the Bellamy's share price is up strongly this week, the rampant buying of its shares has been going on for a little longer.
In fact, over the last 10 weeks the Bellamy's share price has rallied an incredible 55%. Investors appear to have taken advantage of a sharp share price decline last year to make a long-term and patient investment in the company.
Bellamy's shares fell after delays to attaining its SAMR accreditation meant that FY 2019 was going to be a tough year with sizeable declines in sales and profits.
But investors appear pleased that management remains confident that it will receive the accreditation and is ready to launch its Chinese marketing plans as soon as it is granted.
The Bubs share price has been on fire this week after announcing a potential joint venture with Beingmate Baby & Child Food Co. in Shanghai. If the joint venture goes ahead it will distribute and promote Bubs infant formula and organic baby food products in the massive China market.
Beingmate is a very experienced infant formula seller and has a wide distribution network that will undoubtedly be very helpful for Bubs.
However, investors appear to have overlooked the fact that Beingmate doesn't have the best track record.
Late last year there were reports that dairy giant Fonterra was unwinding its Australian dairy joint venture with Beingmate and considering the sale of its 18.8% stake in the company. At that point Beingmate was being threatened with delisting from the Shenzhen Stock Exchange and seeking financial support from the Chinese government.
So only time will tell whether this joint venture succeeds.
Which infant formula company should you buy?
Whilst Bellamy's shares are no longer the bargain buy they were before Christmas, I still see a lot of value in them if you're willing to make a buy and hold investment.
In addition to Bellamy's, I think rival A2 Milk Company Ltd (ASX: A2M) would be a great long term option as well.
