Archer Daniels Midland Company (NYSE:ADM)

BigDMan64 (99.44) Submitted: 6/13/2008 11:41:31 AM : Start Price: $37.56 ADM Score: -18.89

Is ADM one of those opportunities of a lifetime at these price levels? Maybe, depending on what your investment objectives are. If you are looking for a 100% + return in the next six months, read no further. However, if you are interested in a company that is well situated to take advantage of short term and long term opportunities in the agricultural segment worldwide and turn those opportunities into substantial shareholder value, we might have an once in a lifetime opportunity to buy value at these levels. As a disclosure, I worked for ADM for five years in upper middle management. Before I went to work for them, I was just like about everyone else, I really did not understand what ADM was all about. Often I see them touted as either a buy or a sell because of their ethanol exposure. Although one of the original large scale ethanol producers in the world, ethanol is an inconsequential part of their business. What their primary business is trading, processing and transporting virtually every agricultural product including very high value by products extracted through their processing process. They are one of the world's largest producers of high fructose corn syrup, a major world wide supplier of lysine, on the front end of implementing new and sustainable technologies with a real life positive impact on the environment. They also are a 100% hedged, 100% of the time company in their trading activities. Although the reality with all hedged companies is that there is always some unhedged risk at any given time they are so large that this risk is inconsequential. What is very consequential to their bottom line is that they developed a trading platform that matches offsetting trades within their company and subsidiaries prior to executing those trades in outside markets. This matching process occurrs in literally seconds of an order execution. The end result is that it saves the company tens of millions of dollars each year in broker and transaction costs. That pure profit heads straight for the bottom line. At a current PE of less than 10, with the prospect for agricultural and its products more bullish than in memorable history, and demand for food expected to increase by 50% by 2030, ADM is positioned perfectly to take advantage of this opportunity and owning ADM and holding long term will allow its investors to participate in the agriculture bull market with a lean management team that has a history for more than 40 years of capitalizing on any market environment, but particularly the volatile, schiczophrenic markets that we have seen for the last year and should expect to see more of down the road.