Barrons
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SATURDAY, OCTOBER 8, 2011
Prepare for a Bountiful Harvest
By JAY PALMER | MORE ARTICLES BY AUTHOR
Seed companies, crop producers and farm-equipment makers are poised to prosper, as food demand increases with population growth.
From the article:"...Giant commodities processors such as Bunge (BG) and Archer Daniels (ADM) might be a good place to start. A major oilseed processor and commodities trader, Bunge hit a 52-week low of 54.03 last week, and is down 22% from an April high of 76.13. (Like most farm-related shares, the stock peaked at a much higher level in 2008, at 133.) Shares are trading for a discounted 8.3 times next year's expected earnings of $6.93 a share; 0.15 times estimated 2011 sales of $54.8 billion; and 0.7 times book value. Bunge is likely to benefit from rising demand, especially for sugar. Standard & Poor's has a 12-month price target of 81.
ADM might be an even better bet. Its shares, at 25.91, have fallen 30% from their 52-week high and are trading at levels last seen in 2006. Earnings are somewhat volatile and are expected to fall to $3.10 a share in the fiscal year ending next June 30 from $3.47 in fiscal '11. Analysts are estimating earnings of $3.39 for fiscal 2013. The shares trade for 8.4 times next year's estimated net, and about 20% of current-year sales. Some analysts see the stock returning to 35 in a year, propelled in part by rising prices for corn sweetener. ADM yields 2.5%, and Bunge, 1.7%...."
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A good article (may require subscription). The author provides a good argument for long term growth (due to world population growth). Many of the companies mentioned in the article are selling near 52wk lows and based on their historical PE's and future 'analysts' earnings estimates may provide a good "value" entry point at current levels. The companies discussed are all large caps and pretty well known. I have found that there are many 2nd tier companies that can be bought at even better values.
Disclosure: I own BG, ADM & DD all mentioned in the article.
EKS |
