Jake Berzon

ADM: The Way to Play the Agriculture Commodities Game

I sold ADM at $27.35 today for a 32.2% gain (including dividends and excluding commissions) in less than 3 months. The decision to sell ADM was based more on technical reasons than fundamental ones. At its current price ADM is again trading on it's cycle adjusted long term trade line. The price has doubled since hitting the 52 week intraday low of $13.53 just 2 months ago. Fundamentally, I expect the rapid drop in price of ag commodities to influence ADM's short term profitability - they inventory and do not fully hedge. Q4 will be helped by lower transportation costs, but this may not be enough for ADM to deliver to average analyst expectations. (And we all know what happens in situations like this.) Also fundamentally, I estimate ADM to now be trading in its fair value range.