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Archer-Daniels-Midland Company Message Board

  • maredj2 maredj2 Jan 23, 2007 4:32 PM Flag

    It's not all corn for ADM

    Updates to Jubak's Picks
    Buy Archer Daniels Midland (ADM, news, msgs).
    I'm adding Archer Daniels Midland, the largest U.S producer of ethanol, to the Jubak's Picks portfolio now because 1) I expect that President Bush will talk up ethanol some more in his State of the Union message on Jan. 23, and 2) the momentum to do something -- anything -- to promote the production of alternative fuels is growing. I like Archer Daniels Midland in these circumstances because, as the world's largest corn processor, the company is in a position to profit from any short-term boost to corn-based ethanol production, and, because, realizing that corn is only part of the global alternative fuels mix, the company has started to invest in producing ethanol from sugar cane in Brazil, producing biodiesel from palm oil in Indonesia, and in producing biodiesel from rape seed oil in Europe. When I first wrote about these shares back in May 2006, they traded at 25 times trailing 12-month earnings per share, toward the high end of the historical range of 13 to 33. Now, thanks to a 35% drop in the price of oil since July 2006, the shares trade at just 13 times trailing earnings and 12 times projected earnings for the fiscal year that ends in June 2007. As of Jan. 23, 2007, I'm adding the shares to Jubak's Picks with a December 2007 target price of $44.20 a share. (Full disclosure: I will add shares of Archer Daniels Midland to my personal portfolio three days after this column is posted.)

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