Today marks the second anniversary of my mother’s passing. It’s true that time has brought some healing. Still, not a day has passed without me thinking of my parents.
Not too much commentary on the markets. $FEED and $ONP have been a disappointment. I’d say raise some cash where possible. Don’t buy short ETFs; instead buy gold via $GLD.
This post was done via WordPress for Android phones. =)
Here’s a link to download the PDF file for AgFeed Inc’s presentation given this week in San Francisco. The main theme to note is that they are continuing to integrate the full hog production cycle (womb to tomb) to realize maximum profit margins. They are estimating full-year revenue for 2010 to come in at about $200-205M. This is roughly a 15% increase from last year’s $173M number. For full-year 2011 they are currently projecting $295M or so. So from 2009 you’re looking at a projected 30%+ CAGR. I doubled up on my FEED position earlier this week at $3.06 (average price of all positions is now $3.22/share).
I recently wrote to the investor relations department at Agfeed Industries regarding the receivables. It appears that the recent decision to extend their customer’s receivables has adversely impacted their stock. Keep in mind the response is from the IR department so obviously there is so bias.
1) Are the durations of extensions now increasing, decreasing or flat from the previous quarter?
The durations are generally for 60-90 days. We are collecting the majority of the recent extensions by the end of June to show how short term the loans are.
2) Are you folks charging any interest rates on the outstanding receivables?
That is not a good practice in China. Secondly, business is conducted in a more supportive manner; particularly if the customers need a few months for the market to turn up. We made a calculated decision for we are also in the hog production business and we see positive prices in the last half of the year.
3) Do you have any estimates about rates of defaults for the receivables (if any)?
We have written off less than $300,000 over 3 years.
Sincerely,
AgFeed Industries, Inc. Investor Relations
It has been a roller coaster of a ride the past two weeks. I don’t think the downturn is finished even after today’s 280+ point rise on the Dow Jones. There’s still some lingering issues about Greece and whether or not their debt will ultimately have to be restructured. The Spanish banks still have to come clean with their subprime loan losses. Two stocks I’m keeping an eye on are FEED and ING.
I wrote about FEED awhile back and I have already taken a position at an average of $3.38/share ($3.50 and $3.27 purchases). FEED is very attractive given its growth rates. A lot of Chinese stocks have been battered, but what’s good about FEED is that corn prices are starting to drop. The Chinese government has promised to keep an upper limit on corn prices and has also been exporting record amounts of corn from the United States. FEED has been battered because of the rising costs of corn (used to feed the pigs). It’s a business that is tough to emulate because of the complexities of starting pig farms and creating a distribution channel to sell the pork. Contrast this with another Chinese stock like China Finance Online [JRJC] that has also fallen sharply because of copycat websites that offer similar financial services and advice. The tangible book and book value of the stock is listed at around $2.87 and $3.43 a share respectively. When corn prices stabilize and perhaps decline the 2nd half of this year I expect FEED to earn roughly $.09-$.10/share per quarter making it quite attractive at today’s current prices.
Still finding out more about ING, but it would be attractive if there was more distress in the European financial companies and if it drops below $5/share.
I’ve been keeping my eyes out for a stock that would be a play on China’s growing economy. By now most of you have probably seen projections of how China’s GDP is estimated to surpass that of the United States within the next 40 years. You may also be aware of the rapid urbanization happening within China and the rising standard of living enjoyed by the middle class there. I wanted to see if I could find a stock traded on the U.S. Exchanges that would benefit from these trends in China. The stock that stood out was AgFeed Industries [FEED] a Chinese company that specializes in the animal feed and production related to the hog industry.
Image from flickr.com
