Looking at ADM below 1.0x book value

Takeaway: Since the beginning of 2009, ADM has traded at an average of 1.21x book value - the current number is 0.99x.

Within the context of our Consumer Staples Sector launch this afternoon, we highlighted ADM as one of our preferred names within the firm's broader macro call of falling commodity prices.

ADM has significantly lagged the overall market in 2012 (-2.9% YTD) over concerns that weakness in the company’s bioproducts (ethanol) and merchandise and handling segment will persist.  Ethanol margins suffered from higher corn costs, as well as weak domestic demand and low capacity utilization across the industry.  Merchandising and handling results were at the mercy of a smaller U.S. corn harvest.

Both segments could be in a position to rebound as we move into 2013 and a new crop goes into the ground.  With corn prices remaining at elevated levels, the incentive to plant corn certainly exists, and we expect that we will see corn planted fencepost to fencepost.

Given the valuation relative to historical norms, the risk/reward makes sense to us as we look out over the prospects for the 2013 crop year and likely planting decisions by farmers.

Looking at ADM below 1.0x book value - ADM price to book