Ag Growth International Inc (AFN.TO)

Equipment for processing cereals. Grain handling and storage. It has come back from its low, rather like POT-T. Farmer’s incomes have lagged so they can’t buy as much. You have to be positive on grain volumes to fill new grain storage bins.

(Market Call Minute.) Wouldn’t be real high on this right now. It would probably be a Sell for him based on the fact that there haven’t been great conditions for farmers, so they don’t have a ton of cash flow.

Holds this in the income side of portfolios, where he looks for dividend growth. The acquisition of Westeel was great, and gave them a huge market share in Canada. They’ll be able to cross sell their bins. Following the drought in Canada that affected the amount of grains coming out, and the issues of potash prices, it got to a level that didn’t make any sense. Management indicated they are not going to cut their dividend. They are also making acquisitions in Brazil, which is really smart. Feels the dividend is safe.

(Market Call Minute.) This is a tough one. He owns a small position. Wouldn’t add any right now, but in the long-term you will make money in this sector.

POT-T is very much a commodity business and can’t control prices any more. He prefers the equipment side like this one. They have smaller, less costly items that have to be replaced more often. Sales are booming in South America. This is a great buying opportunity where it has just bottomed out.

Earnings estimates chopped by 22%. Analysts are still optimistic for a 46% growth in the second half of this year, but he is not positive given that earnings are currently down 69%.

Agricultural infrastructure. They make storage, augers and conveyors. There have been concerns as crop prices and farmers’ income has come down, so are not ordering as much. They are trying to expand their Brazilian operations. Have been in the Ukraine area for a number of years, which is a good area, except they are larger projects and take longer to find and get. Recently appointed a new CEO, so he is watching to see what he is going to do.

A core holding. Every few years farmers hold off from their purchases. Farmers will have to pay up down the road. Storage is a huge problem around the world and there is a huge market for their equipment. He bought recently.

This is suffering from low crop prices. They do a lot of the smaller machinery that farms would purchase. Very leveraged to the US market. Longer-term they are well positioned; it is just really a broader call on the agricultural cycle right now. It’s on her watch list. Dividend yield of 8%.

Thinks there is good potential here. Unfortunately every time China hiccups, the agricultural sector suffers. Valuation is quite cheap and the growth rate has been pretty good. Had quite a nice, nice run, but suddenly the sector said hang on a second because maybe we are going to get a slow down over all. If you buy the stock right now, you have to be prepared to own it for a full cycle, and wait for the next upswing in the agricultural space. In terms of the dividend, there is a fair degree of debt and this is a cyclical business. He would say the dividend is okay, but he wouldn’t say safe. Valuation is pretty attractive and it has a very good potential to grow in a better environment.

Had his eye on this for some time now. They are consolidating the farm equipment business from a number of different avenues. You need to see a ramp up in farming and product pricing. At that point, farmers will go out and spend more money. Have a fair bit of business where they have diversified into Eastern Europe. Has a nice yield.

He used to own it, but it got kicked out of his portfolio. They are exposed to the growing cycle with the crops. They are now exposed to South America.

Performance year to date on the business side has been pretty good. The problem lies in the next couple of quarters. Due to the wet summer in Western Canada, it has taken its toll on the farmers. They greatly decreased their guidance for the 2^nd half of the year. With the wet summer behind it and the better prospects next year, you will see growth in earnings resume next year. Dividend yield of 6.34%.

Canada’s leading manufacturer of grain handling and storage equipment. They just completed the acquisition of WestSteel. They are growing very quickly internationally. Great margins.

Has been on his radar for about 6 months. They do grain storage, augers, conveyor belts, etc. anything to move or store grain. There are some interesting themes going on globally, such as Brazil which is now almost surpassing the US in the amount of grain they produce with 25% less equipment This is a big growth opportunity for this company. Recently acquired Westeel, which he feels is going to be a good. Yields are looking pretty good in North America. Dividend yield of about 4.5%, so a great stock to hold in an income portfolio.