Sunday, January 26, 2014

The Andersons, Inc. (ANDE): Secret Grain Leader Up 58% In 2013 And Still A Buy

It's been a tough year for agriculture stocks. With the prices of corn, beans and wheat pulling back after surging higher last summer on a record drought in the Midwest, agriculture stocks have trailed the overall market by a sharp margin.

That weakness shows up in Market Vectors Agribusiness ETF (MOO). As you can see in the chart below, MOO is still down 2% on the year in spite of a recent bounce while the S&P 500 has gained 20%.

While I believe that is merely short-term weakness in an otherwise bullish long-term trend in the food and agriculture industry, there is one company that has dodged any weakness what so ever.

The Anderson's, Inc. (ANDE) is an agriculture conglomerate, operating in 5 divisions that includes a rail shipping and nutrient business. But its Grain division is its biggest, accounting for more than 60% of revenue, where the company is a wholesaler of grain and grain storage services. The company's share price has been hot in 2013, posting a market and industry crushing return of 58%. Take a look below.

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But looking forward, the company and investors are in position for more gains.

The biggest trend that will fuel The Andersons is the growing global population that continues to pressure food and grain resources. A record drought in the Midwest last summer pushed grain prices to all-time highs. Surging demand out of emerging markets such as China and India are also tail winds. The global food scarcity story is well in play, and the Andersons is a great way to play it.

That bullish trend has analysts calling for impressive earnings growth of 28% in 2014 and 12% annual earnings growth in the next 5 years.


But it's not just all about sales and earnings growth. In spite of big gains in 2013, the Anderson's forward P/E of 16x is in line with the S&P 500 and only a slight premium to its 10-year average of 13. It's PEG ratio of 1.16x is only a slight premium to the benchmark of 1 for value.

The Takeaway

The Anderson's has had a great year, with shares up 58% on strong sales and earnings growth. But the outlook remains bullish, with analysts calling for annual earnings growth of 12% in the next 5 years. Shares currently trade at 16x forward earnings, directly in line with the S&P 500 in spite of a 58% gain on the year. That makes The Andersons a great way to cash in on the bullish trend in food and agriculture as a leading player in the international grain market.

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