"Martek Biosciences (NASDAQ: MATK) is an intriguing company that can trace its roots back to a small division at Martin-Marietta whose goal was to find a way to feed astronauts on a journey to Mars," notes Nate Pile.
"Now, its nutrional oils are used in infant formula and other food products." explains the editor of Nate's Notes. Here, he looks at the firm, and the potential for a "short squeeze."
"The company uses algae and other microbes to produce nutritional oils, most notably docosahexaenoic acid (DHA) and arachidonic acid (ARA).
"These two oils have been shown to promote neural and retinal development in babies and young children, as well promote mental and cardiovascular health in adults.
"Martek sells these oils as nutritional supplements to all of the major infant formula manufacturers in the world, and the company has also signed agreements with a number of other major food companies that are developing new food products containing Martek's DHA.
"Notable customers on this side of the product lineup include General Mills, White Wave Foods, Breyer's, Danone, and Minute Maid (Coca-Cola), to name just a few.
"With consumer awareness of the health benefits of omega-3's growing at an accelerating rate, I believe Martek is very well-positioned to cash in on the trend as more and more companies work to add DHA to their product lines.
"Meanwhile, I believe the ongoing battle between the longs and the shorts in this stock may be nearing a tipping point. With the stock once again pushing into new multi-year high territory, I believe there is a very real possibility that we are only a few points away from the beginning of what may turn out to be a very spectacular short-squeeze in the stock this summer.
"Martek just recently reported earnings, and in my humble opinion, they go a long ways towards showing that the shorts may be fighting an uphill battle on this one.
"Martek announced record revenues of $90.7 million, up 18% from the prior year's second quarter as well as earnings per share of $0.28, an increase of approximately 87% over last year's second quarter.
"Consequently, you are encouraged to be patient when taking profits if/when the stock does start to move, as current circumstances suggest that the move will likely be larger (and last longer) than one would otherwise expect to see if there was not such a large short position in the stock."
