Thursday, January 13, 2011

"Corn Soaring, ADM Boring, Investors Snoring" (ADM)

I think we have to give the headline of the day award to BloggingStocks. Here's the story:
Last year, Archer Daniels Midland (ADM) was included in my stock picks for 2010 and it lost 4.9%. I gave some consideration to keeping it in the mix this year but thought more highly of other stocks in 2011, so I cast it off.

The turning of a calendar page is arbitrary and investments have only modest correlation to it in most instances. However, two weeks into the year ADM is already up, closing Wednesday at $32.56.
Corn prices have been rising and when last I checked futures were up another 1.47% in early morning trading.
Just because I didn't favor ADM in my top eleven does not mean there is no value there. On the contrary, there is. The increase in corn prices only shines the light on it. Not to mention that increases in oil prices will boost the ethanol business. As reported here yesterday, the USDA lowered the U.S. 2010 corn and soybean production. Additionally, the USDA cut Argentina corn production estimates, due to a drought weather pattern that is impairing that country's pollination season.

ADM has a trailing P/E of 11.51 and its projected to fall a point this year. That may be a conservative view, highly dependent on fickle weather affecting world harvests. The price-to-earnings-to-growth ratio (PEG) of 1.34 is on the low side. The book value (P/B) of 1.33 is modest and the price-to-sales (P/S) is very low at 0.31. Actually the P/S is downright cheap.

If you have listened to "my pal Warren" over the years you will remember that he often speaks about acquiring "boring companies." I think ADM fits the bill and is simply being overlooked. It's no joke that investors are snoring on this one. They prefer clustering around the gee-wiz stocks that are in the headlines more often. ADM claims in its advertisements to be the supermarket to the world. It might also feed your portfolio a profit this year....MORE
ADM is a leader in absorbents used in adult diapers, a growth market as baby boomers age.