luvb2b (99.89)

You hear that Mr. Anderson?... That is the sound of inevitability... It is the sound of your death... NOT!

July 30, 2008 – Comments (1) | RELATED TICKERS: ANDE , MOS , POT

A classic line from The Matrix.

Once again, it looks like the stories of the death of Mr. Anderson has been greatly exaggerated.

Tomorrow when Mr. Market opens, the Andersons is going to be laying waste to the short sellers as if they were so many Mr. Smiths.

The Andersons - Richard, Michael, Daniel - yes, the Andersons (NASDAQ: ANDE) just raised guidance for the second time in a month.

The Andersons is an agricultural and rail company.  The stock has been absolutely hated for the past two years because of their ethanol exposure.  Never mind that they run their ethanol plants profitably.  The shorts certainly didn't mind that fact.

The shorts also didn't mind the fact that the Anderson's sell fertilizers.  While every other fertilizer company has doubled, tripled, quadrupled, or more the last two years, the Andersons has simply languished in a holding pattern.  Shorts pounded it mercilessly selling 3 million shares of this tiny float short.

It's highly likely the Andersons is a significant short holding in computer driven 130/30 long/short hedge funds.  These funds will often buy leading companies in a sector and then short laggards - for example, buying Mosaic (NYSE: MOS) or Potash (NYSE: POT) and then shorting the Anderson's as a hedge to enhance risk adjusted return.  The mindless computers do all sorts of things in their imaginary investment Matrix, but in the end they end up buying what is going up and shorting what isn't going up.

This strategy is going to feel serious pain tomorrow. 

Another problem for the short sellers is buying back 3 million shares of a stock that trades only 100-200,000 shares per day.  The recent highs in the Anderson's are in the mid $48 range, and 52 week highs are at $52.50 or so.  The all time high is just North of $62.  Those are key levels to watch, as each level is crossed there are sure to be a batch of short sellers that will throw in the towel. 

By the time the improved earnings are delivered over the coming months, the stock could be much higher, at which time it would also qualify for the IBD 100 list (this may take 2 more quarters of solid earnings).  Look at the P/E ratios of the other fertilizer stocks, they trade 20-40x current earnings.  By comparison the Anderson's is at 11.5x trailing earnings.  Based on all of the above, I see a realistic chance that the Anderson's trades over $70 later this year.

The Andersons has historically always been conservative with their guidance, and with tonight's update into the $5.00-$5.40 range I feel the company will actually post somewhere in the range of $5.50-6.00 for the year.  At today's close of $42 the forward P/E ratio is less than 8.  To get to a ratio of 12 the stock would trade right up near $70.  

My message to the Anderson's shorts:

"This is your last chance. After this, there is no turning back. You take the blue pill - the story ends, you wake up in your bed and believe whatever you want to believe. You take the red pill - you stay in Wonderland and I show you how deep the rabbit-hole goes."

- Morpheus from The Matrix

The Andersons, Inc. Expects EPS to Exceed Previous Guidance
Wednesday July 30, 5:20 pm ET
Management to Discuss During Quarterly Conference Call

MAUMEE, Ohio, July 30 /PRNewswire-FirstCall/ -- The Andersons, Inc. (Nasdaq: ANDE - News) announced today it expects its full-year earnings per share to exceed previous guidance.

The full-year 2008 guidance is expected to be within the range of $5.00 and $5.40 per diluted share, up from the previous estimate of $4.40 to $4.80 per diluted share announced in June. The company's earnings per diluted share for 2007 were $3.75, which set a company record.

The increase is primarily attributed to the Plant Nutrient Group's continuing performance trend this year which will be discussed, as well as the second quarter results, during the company's quarterly conference call on Thursday, August 7, 2008, at 11:00 a.m. Eastern Time.