Archer Daniels Midland Company (ADM-N)

This had a big earnings collapse. It is currently at $40.81, and his model price is $45.64. There was a big decline in the model price from about $64, and is not sure why that happened. 3.14% dividend yield.

AGU-T vs. ADM-N. AGU-T has the merger firmly baked into the stock. ADM-T is well positioned with good commodity exposure and from here has a good 15-20% upside in the stock. They don’t use opportunistic hedges but have a commodities trading desk and lock in some of their contracts.

(Top Pick Sep 9/14, Down 4.39%) He got stopped out. The AG space had been choppy at best. He got out in the fall of last year.

A very difficult company to understand. In the grain trading business. A few years ago there was a very popular story about the consumption of grain. Asian consumers in particular were going to be eating more protein, which was going to drive the demand for grain, and grain prices were going to go up. We are not so convinced now about that story, and grains are actually in a big surplus. Would be wary of this.

(A Top Pick Sept 15/14. Up 6.72%.) (These 3 were a “Buy on Weakness of the market” plays.) From about mid October through to the end of the year is the time of the year for agricultural stocks.

His model price is $50.41, a 13% upside. The risk here would be that it could fall back to the $41.50 level if the markets sell off any more. He would be a buyer at that level. 2% dividend yield.

The 3 Top Picks are “Buy on Weakness” plays. Agriculture products tend to do well from August all the way through to the end of the year. However, we have seen grain prices get crushed preventing fertilizer stocks from doing well. This is just a food processor so it doesn’t have that fluctuation. On average, it gains about 16% from the beginning of August through to the end of December and has been positive 90% of the time.

This is a beneficiary of the huge crop in corn and wheat. Prices for the product are very weak, but all they do is process, so it just comes down to volume for them. They came off 2 years where there was drought in the US and their earnings were depressed. They have become very efficient to deal with that. Now they have a bumper crop and are likely to have much higher volumes. Generates cash flow yield of almost 8%. Very shareholder friendly. Have grown their dividend 15% a year over the last 4 years. That is likely to continue. Yield of 1.9%.

Recently acquired Wild Flavorings, food additives, but the acquisition didn’t really do much. With the global weather and the droughts, food and grain prices are up and down. This kind of company is not universally liked, but the product they sell and make, will continue to do well over time. Over the long run, you are going to see more names like this, and he could definitely see holding a position in this company.

One of the dominant players in the agricultural space with commodity exposure, but when you look at their ability to hedge commodity exposure, this is one of the best companies in the business. He sees another 10%-15% upside in this company before the end of the year. 2.2% dividend yield.

Great diversified play. Global food company. One of the premier companies in the business of feeding the world. Diversified book of business. Multistage revenue growth, both from emerging as well as developed markets. Has seen some deceleration in earnings and looking at their revenue, they are challenged to find a footing in the market. Sort of in the 7^th inning stretch. Nowhere near accelerations yet but one to keep your eye on.

If you own, you might want to consider selling this for tax loss selling and then, after 30 days, buy it back. There are a lot of good companies out there and he would probably look at others. (Canadian instead of US.)

Has been hit hard because of the run-up in corn prices. If you own, he would recommend that you sell half your position. Fundamentally, this is a good company and has demonstrated tremendous growth over the last 4-5 years. This could be a temporary setback for them.

Too many moving parts for him. It is too sensitive to commodity prices. When agriculture prices skyrocket by the drought, it hurts companies like this.