Umami (OTC: UMAM) is the fifth taste. It follows the more familiar salty, sweet, bitter and sour. While salty and sweet perfectly describe the farm raised Bluefin Tuna of Umami Sustainable Seafood, the “je ne sais quoi”, or “I do not know what”, perfectly describes Umami’s day of trading. There were no headlines to explain the massive gains experienced by the company on Friday.
That is not entirely true. There was no new news on Friday, but Umami Sustainable Seafood did release its income statement on Wednesday. While Umami’s profits remain a relatively small concern, the number more than doubled from the previous year ending on June 29, 2011. Umami enjoyed a nearly $14 million profit on $57 million of revenue.
Umami is the global leader in sushi and sashimi-quality Bluefin tuna. This industry is valued at over $1 billion, with more than 80% of its production finding its way to Japan each year. The company itself is based in San Diego, California, but its Bluefin are farmed offshore in two locations: the Ugljan Islands, Croatia, (Northern Tuna) in the Adriatic Sea, and Coronado Islands, Baja, Mexico, (Pacific Tuna) in the eastern Pacific. These two farms have a combined annual capacity of over 15 million pounds (7000 metric tons).
Umami Sustainable Seafood has been featured in numerous magazines of late, but perhaps its most memorable piece of publicity was its appearance and over 15 minutes of airtime on Anthony Bourdain’s “No Reservations” at its Croatian facility.
A quick look at stockpromoters.com shows that no one is pushing Umami’s stock. It would seem that the reason for its recent success is solely based on a high-quality product, a great reputation, and a proven market for its unique product.
Farmed tuna, which are raised for 3.5 years in ocean pens, are taking over the Bluefin industry for a number of reasons. Atlantic Tuna has international quota restrictions that are reduced each year. These numbers do not apply to farmed tuna, only the fishing industry. Additionally, farmed tuna grow in size considerably quicker than wild tuna given the availability of larger food sources. On top of this, the tuna that are kept in “restrictive” pens need not waste energy searching for food. Rather, they simply await their near constant supply of food.
A 10kg Bluefin will, on average, reach 100kg in the 3.5 years it spends with Umami. From there, it is pulled from its pen, killed in a traditional Japanese fashion (ike jime) that keeps the meat sweet and “fear free” during the slaughtering process. After this, it is frozen and rushed to Japan for immediate sale.
It is difficult to look at Umami’s attention to detail without being a little awestruck. There is nothing that would suggest Japanese tuna consumption is on the decline. In fact, after years of recession, the Japanese people’s consumption of Bluefin tuna has only risen each of the last 15 years.
Umami Sustainable Seafood closed at $1.65 today. Earlier this year on Feb. 3, 2012, Zacks Equity Research rated UMAM as OUTPERFORM and place a target price at $60.