Ag Growth International Inc (AFN.TO)

We have a ceiling on the stock here. The company has a fair bit of debt. They made several acquisitions.

This has a new CEO, who is an acquisitions expert. He thinks this stock is getting to the point where you have to ask, how much money can they make from these things. They are now going into fertilizer storage. He thinks $60 will be a good price for the stock. Doesn’t think they are covering the dividend, so be careful. It is a competitive business. A risky business for low returns.

A great company. One of the few ways of playing the agricultural sector in a sort of safer non-commoditized way. They make grain and fertilizer handling and storage equipment. Growing internationally. Very well-managed. The stock is down because they did a fairly large equity financing at around $54-$55 in the last few months. However, results have been very, very good. It gives you international exposure to needy infrastructure space overseas. A good entry point.

Agricultural stocks in general tend to do well during the summer and tend to run up through to the end of the year. This one had a phenomenal run all the way from mid-$30 to the mid-$50. Quite a good stock to hold during that time. Right now, we are seeing it shows signs of weakness. Momentum indicators are trending lower. This has been flat since December when the period of seasonal strength ended for agricultural stocks. If it breaks through, very short term support at $50.50, you will see significant downside potential of about $6.

Just made a very accretive acquisition, which he thinks is going to give them EPS growth of about 40% annually for the next couple of years. The payout ratio is looking sustainable at 67% for 2017. Debt to EBITDA is a little elevated, but he sees that coming down. However, it is trading pretty high compared to its historical averages. He would play this by writing puts. Dividend yield of 4.93%.

Not for the faint of heart. It is very whippy, but is a good quality name. It may have gotten a little ahead of itself, so he wouldn’t be jumping in right now. Not sure if there are options on this, but he would be Selling Puts to gain entry at $53-$54.

Had a nice little move in the last while. Fundamentally it ranks quite strong. Last quarter had good numbers. From a technical standpoint he wouldn’t be selling this. It looks like there is still a fair amount of growth, both organically and from acquisitions. Organic growth will come from it being a good crop year in the US, and the delay of buying equipment that has happened over the last 12 months. Farmers are expected to be buying replacement parts and equipment.

Makes agricultural products for the storage of grains, etc. Feels commodity prices have bottomed and it looks like corn and other prices are heading up. The most recent earnings were up 25% year-over-year as of August. Earnings are expected to grow by 52% to $.86 when they report in November. 26% earnings increase expected for 2017 against a 16 PE.

It is a comparable to DE-N. It has a nice chart, nice dividend and nice growth. It is more of a growth play than DE-N, which is more of a value play.

Sold his holdings recently, on valuation more than anything. Doesn’t think the dividend is in trouble here. A very high quality business.

This has about an 83% payout ratio with a dividend yield of about 6%. They missed on their top line in Q1, but are guiding to a stronger 2^nd half. The balance sheet is a little stretched at 3.7X net debt to EBITDA. Thinks this is one that you could own here. Dividend yield of 5.7%.

(Market Call Minute.) This ranks well for him.

(A Top Pick June 18/15. Down 12.48%.) Manufactures equipment to store and handle grain, and are growing globally. A great theme, because there are so many developing countries that have decrepit or no infrastructure compared to what we have in North America. Just made an acquisition in Brazil and are selling more and more into Eastern European countries. Very well-managed. If you want a good, global growth company in agriculture and not dependent on the commodity cycle, this is your best bet. You get a good 6% safe yield.

There has been a very sluggish farm equipment environment. Q1 earnings came in a little bit light. However, management expects a more typical buying pattern to begin in the 2^nd half of this year. Has an 83% payout ratio so your 6% dividend is safe. They have a lot of operating efficiencies in place.

(Top Pick April 23/15, Down 25.22%) They made what he thought was an accretive acquisition with a nice US$ tail wind. The problem was a drought last year. Then finally the demand for Canadian small caps dried up and this one got oversold.