I nibbled on CLP today for $19.14, washing out my cash position to “so miniscule, it might as well be nil.”
With this, I have completed entry into the REIT space. I will not be making any purchases that send me into the Margin Zone. It is a twisted and bizarre place, where your sanity is slowly stretched taught to the point of breaking.
To be sure, margin is a great power, when executed with discretion. However, like a character of the Lovecraft Mythos, all those who are exposed to the realm for too long self immolate and are sent into the dreary darkness of insanity.
On to the next thought, why is Bunge Ltd. so cheap!?
If it weren’t enough that the company is a crop grower during a time of epic price increases across its product lines, the company has the added advantage of cyclones in Australia, droughts in China, the U.S. in severe snowstorms, Russia coming off of last year’s raging wild fires, and global food riots shutting down domestic economies the world over.
What do the markets want, an open invitation?
Meanwhile, BG’s cousins are up 10% or more for the year, but the stock is trading at a discount to its book value.
Do you all know something that I don’t? Please, if so, feel free to fill me in…
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History, sir. This thing was a high flying hedgie-pick along with POT and the rest before 4Q08. As it was taken apart – along with everyone else – analysts of all types scratched for reasons to justify its valuation. Then someone stumbled upon EV/EBITDA, noticed ranges and outstanding debt and said “Ah ha! That must be it!”
Then some group of folks started saying BG needed a better debt rating, so BG cleaned up its books. That didn’t work to bring up its valuation or stock price.
Then Jefferies – new on the scene – says book value is the key. To an extent he is right – BG will move to a change in book value. Where he is wrong is that from now on the multiple on BG will increase as BG’s book goes up. Not sure what his multiple is for a $78 target, but we should start looking at BG going back to ~1.1x book.
Nice pick, it should do well.
I saw you have a history of analyzing this thing. What I don’t get is how ADM can trade for under 2x book but BG is a discount. Ah well, cava…
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Chumpette