Jake Berzon

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    • ADM: The Way to Play the Agriculture Commodities Game
      I sold ADM at $27.35 today for a 32.2% gain (including dividends and excluding commissions) in less than 3 months. The decision to sell ADM was based more on technical reasons than fundamental ones. At its current price ADM is again trading on it's cycle adjusted long term trade line. The price has doubled since hitting the 52 week intraday low of $13.53 just 2 months ago. Fundamentally, I expect the rapid drop in price of ag commodities to influence ADM's short term profitability - they inventory and do not fully hedge. Q4 will be helped by lower transportation costs, but this may not be enough for ADM to deliver to average analyst expectations. (And we all know what happens in situations like this.) Also fundamentally, I estimate ADM to now be trading in its fair value range.
      Dec 09 14:41 pm |Rating: 0 0 |Link to Comment |View article
    • ADM: The Way to Play the Agriculture Commodities Game
      Yes, Ethanol was certainly the story on this stock two years ago. Cramer along with other TV Stock Evangelist Pundits (all big momentum players) were pumping up ADM based on this story. But ADM is so much more than ethanol. It is also biodiesel, alcohol and most importantly food.

      I wouldn't fret over fuel prices dropping recently. Ethanol is a gas additive mandated by law to reduce pollution in many states. Renewable fuels are also mandated by the U.S. Energy Independence and Security Act of 2007. Retail prices of biofuels are only very loosely tied to the price of oil based fuels. They are much more a function of government imposed demand and input costs.

      Today, corn is the input of choice for ethanol production and ADM has access to plenty of corn at the same prices as last year (they hedge). If corn goes out of favor, it would be relatively easy for them to convert production to other renewable inputs, like switch grass.

      The bottom line is, when you can pick up such a quality stock at its tangible asset value, you do it!
      Sep 19 14:28 pm |Rating: 0 0 |Link to Comment |View article

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