The chart above shows why Wilmar is currently languishing at just above $3 when at its peak in 2010, it was worth $7. After a strong run up, crude palm oil prices have come down sharply. As per the index, the CPO prices were at the 1,300 level in February 2011, but the latest end-September index is 710. The supply of CPO has adjusted to demand and prices hence have collapsed and producers such as Wilmar have a difficult time improving margins. Other producers such as First Resources seem to have de-trended from CPO price levels, but I still think the fundamentals are still weak at the moment.
I took a big hit on my investment in Wilmar and to a large extent I regretted. This is because I bought the stock because it looked like a discount from its old days. However, the old days, like the VHS, never did come back. That is why good thinking processes must be in place to make sure silly purchases like this are kept to the minimum. Good processes such as understanding the industry's and company's fundamentals are crucial to protect profits.