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Are you looking to find a way to get exposure to an industry leader in the plant-based food product sector? Look no further than the Swedish-Danish company AAK (STO: AAK), which trades on the Stockholm exchange. Stocks on this exchange trade in Swedish Krona, so the current price of 201.70 SEK, is the equivalent of approximately $ 23.00 USD per share. The stock has performed reasonably well over the past 52 weeks, and has followed the trajectory of many companies that are recovering from the COVID-19 pandemic. Recently, AAK hit a new 52-week high, but even still, the performance has actually lagged the benchmark S&P 500 index over the past year.
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AAK is involved in the production of vegetable oils and fats that are then used in a multitude of other products. It was established back in 2005 in Malmo, Sweden, and now has production plants in over twelve different countries around the world spanning the continents of Asia, South America, North America, and Europe. AAK is a firm believer in sustainability and the long-term quality of the environment, partaking in numerous global initiatives to reduce their carbon footprint through their industrial plants, as well as decrease the amount of clean water that is used in production. AAK also pays shareholders a dividend yield of 1.17% annually, making this a potential rock solid addition to any diversified portfolio.

The Bullish Case: As the world transitions to a diet that includes less red meats and more plant-based proteins, AAK is positioned well to continue its cultivation and production of oils from sources like palm, coconut, soy beans, palm kemet, shea, and rapeseed. AAK produces for some high demand industries such as pharmaceuticals, plant-based cosmetics, human food products, and animal feed. Costs of harvesting plants such as palm and soy beans are much cheaper and although there are environmental issues that stem from large scale plant farming as well, it is ultimately less damaging to the ecosystem than free-range cattle or other forms of animal harvesting. AAK did see much of its financials take a hit during the COVID-19 pandemic, but a strong finish to the fourth quarter is encouraging as operating profit rose by 8% quarter over quarter to a new all-time high of 607 million SEK. While this lags the recent trend of consistent 10% year-over-year profit growth, we can attribute some of this to COVID-19.

The Bearish Case: When a sector is growing in demand, other big fish like to join the party, and AAK could see increased competition from established conglomerates such as Nestle, as well as several other brands in Europe itself. Then there is the ethical elephant in the room: the destruction of wildlife habitats and rainforests to harvest palm trees. AAK itself is working towards becoming reliant on 100% sustainable palm plants, and even started the RSPO or Roundtable on Sustainable Palm Oil alliance in 2005 to get other companies to join their efforts. Still, until it is 100% reliant on sustainable palm sources, this will be a dark cloud that hands over the company, and some investors just want no part of unethical enterprises.

Final Verdict on AAK: Consumer trends are certainly in AAK’s favor, and having quickly expanded across several continents, AAK is well positioned to remain a global leader in the plant-based oil industry. If you can get over the ethical issues of harvesting palm, AAK makes for an excellent and reasonably priced stock to add to a well-diversified portfolio, and even pays a nice dividend on top of that!

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