This note was originally published February 14, 2013 at 23:57 in Consumer Staples
On a day where we saw Berkshire Hathaway’s appetite for global consumer brands manifest itself as a $72.50 per share bid for Heinz (HNZ), a much smaller investment, but an investment that is no less consistent with Berkshire’s investment philosophy, may have escaped investor notice. In a 13-F filing, Berkshire Hathaway reported a 6 million share position in Archer-Daniels Midland (ADM).
With the overarching investment principle a focus on long-term value, Berkshire has also displayed an interest in infrastructure when it ventures out beyond insurance. We believe that part of the long-term investment thesis surrounding ADM (and Bunge, BG, as well) is the capital investment that both companies have made in global, agricultural infrastructure and the likely potential future returns associated with those investments.
The assets at ADM and BG are unique and leveraged to what we view as a powerful, long-term investment thesis – feeding an expanding global population and the associated need to get the crops from where grown to where consumed.
We expect that ADM shares will get a boost from this news and continue to see upside to the mid-$30’s in the name as we move through the start of the crop year in the U.S. Similarly, we see upside to shares of BG, despite a recent quarterly result marred by the performance of the company’s risk management operations.