3. The Andersons (ANDE)
Buffett likes “old” industry companies like railroads and chemicals. These are companies which are the building blocks of the economy.
It’s surprising, then, to see that Berkshire Hathaway doesn’t own any agribusinesses outright.
The Andersons was founded in 1947 by Harold and Margaret Anderson as a single grain terminal in Ohio with the purpose of helping farmers get their corn to market. It has grown into a 6 division business with grain, plant nutrients, railcar leasing and repair, industrial products formulation, turf products, retail and ethanol operations.
On Nov 6, The Andersons posted a monster 50% beat as earnings were $0.91 compared to the Zacks Consensus Estimate of just $0.61. Ethanol and the Rail Group led the quarter, with the Grain Group also solid.
The company had been cashing in on higher fertilizer prices the last few years when that was hot but now it is Ethanol that has taken that position. However, one thing to watch is that the EPA has issued a Proposed Regulation which will change ethanol requirements in 2014.
Investors don’t seem worried about the impact on The Andersons as shares have barely budged from their 2 year high.
The Andersons is expected to grow earnings by 10% in 2013 and another 23% in 2014. Despite trading near its multi-year high, there’s still value in these shares.
- Forward P/E = 18
- P/B = 2.3
- P/S = 0.3
- Zacks Rank #1 (Strong Buy)
- Market Cap: $1.5 billion
[In full disclosure, the author of this article has owned XOM since 2000.]
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