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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: E_K_S who wrote (43526)	8/3/2011 10:08:15 AM
From: Spekulatius	Read Replies (1) \| Respond to of 78699

re BG, ADM - thanks for the background info regarding BG. After another look today (I last checked on them ~1 1/2 years ago and soured on them because of an uneven earnings track record) I in fact like them better than ADM. Since they sold the fertilizer business in 2010 for 3-4B$, they seemed to are in the process to retool the company. They are adding grain terminals in the Black see (Ukraine) and the West coast, they purchased some sugar milling assets in Brazil (`~1.1B$ was the cost if I remember correctly) and generally add assets to gain international scope. I like this very much. What I do not like is their track record of really bad earning misses. Quite a few were caused by the fertilizer business. I also don't like that they issued shares to buy the Brazilian sugar mills even though they had more than 3B$ in cash (from the sale of the fertilizer business) coming in just a few month later. (The sale of the fertilizer business was already in process when they bought the sugar mills). Things like that really irked me and I sold my shares in the 50$ range. You are correct that ADM corn syrup business may be in a LT decline and the ethanol business does not look that great either. Operational, I do rate them above BG though. Anyways those are things to consider when buying ADM or BG. FWIW, I am surprised by the low profitability of both ADM and BG. They trade at about 9x EBITDA/EV, which is not very cheap. It may be because they need to hold on to a fair amount of seasonal inventory (grain harvest) to support their business.