Chasing Value: Bunge Limited (BG) in name only
Posted by: in Companies Competitive StrategyFiled under: International markets, Forecasts, Consumer experience, Competitive strategy, Brazil, Chasing Value, Agriculture, Stocks to Buy, Bunge Ltd. (BG)
Bunge Limited (NYSE: BG) is everywhere on the food chain according to the AOL Money & Finance profile. This includes being the leading global soybean processor, a leading South American fertilizer maker and the world’s largest oilseed producer. The stock has hardly taken a breath in its ascent over the last five years. On December 28, 2007, BG closed at $119.03 per share.
Soy is used in so many products as an alternate ingredient and/or vegan-friendly product, with new ones being created each day. This fact alone might make Bunge a growth story, even if world demand for food wasn’t increasing at such a rapid pace.
Over the last year, Bunge leaped 70%; in the last five years, BG has gained 433%. Normally this is not a place I would be looking for a cheap purchase. However, its P/E ratio is only 19, which, given its growth chart, it still seems cheap. When we consider its P/S of 0.33 which is cheap, and a small dividend yield of 0.58%, it does seem like a value, that’s if demand continues to rise.
I believe it will continue to rise since the rapidly growing global economy is raising the standard of living dramatically for hundreds of millions of “newly minted capitalists” in China, Russia, India, Eastern Europe, Brazil and elsewhere. Improved of at least changing diets are ‘feeding demand,’ and people are also eating much more.
No longer satisfied with starchy rice, potatoes and beans, they have increased their consumption of fish, poultry, beef, and a wider variety of fruits and vegetables, and even alcoholic beverages. Of course they continue to adopt to the dubious growth of Western fast food restaurants too.
In my pursuit of 2008 value stocks that offer growth opportunities and safety too, I looked for companies that would benefit from these trends for many years. Looking at the five-year chart and the rapid jump in the stock price over the last six months I’ve to wonder if I’m making this pick at the tail end of a euphoric run or just getting in at the early stages of a long term trend. I choose to believe the latter.
People have to eat, and soybean products are not only a basic staple but they are becoming an integrated part of the vegan world, designer foods and special diets too. This seems like a very safe bet, and one “my pal Warren” might find just boring enough to invest in.
To find potential opportunities and verify my track record, read Chasing Value and Serious Money.
DISCLOSURE: I am an active investor. I don’t own shares of BG but may acquire shares at a future date.
Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm.
Entries (RSS)