Uncertain economic times lead to uncertain corporate performances, which places a premium on demonstrated business models, and that's why I'm reiterating my Buy rating for Archer Daniels Midland (NYSE: ADM), first recommended on March 25, 2009, at a price of $28.78.
Archer has not appreciated as much as expected since March, but the Buy call remains; look for FY2009 revenue to increase 2-3%, reflecting seven, new agribusiness plants.
To be sure, the global recession has weighed on ADM's results, but long-term the company remains well-positioned to capitalize on the development of emerging markets and population growth, which will maintain/increase demand for food. Oilseed performance will be a star performer, followed by agricultural services. Margins should increase, starting this year. The First Call FY2010/FY2011 EPS estimates for ADM are $2.42 to $2.68.
Technically, as noted, ADM's stock chart progress has been slow, but the stock has been in a mild uptrend since hitting a low around $23 in the spring.
Stock Analysis: Archer Daniels Midland is a moderate-risk stock. If you've already purchased the company's shares, hold them. If not, consider buying a 25% position in ADM now; then buy another 25% in one month, if U.S. and global economic conditions don't worsen substantially. Under any circumstance, don't buy more than 50% of your ADM position before December 2009. Sell/stop loss if you were to buy shares in this company: $17.
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Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.
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