How Successful Investors Get RICH

Learn everything you need to know in 'The Canadian Guide on How to Invest in Stocks Successfully' for FREE from The Successful Investor.

How to Invest In Stocks Guide: Find 10 factors that make your investments safer and stronger.

 I consent to receiving information from The Successful Investor via email. I understand I can unsubscribe from these updates at any time.

Topic: How To Invest

Canadian grain handler aims for gains as global markets recover

Canadian grain handler aims for gains as global markets recover

Pat McKeough responds to many requests from members of his Inner Circle for specific advice on stocks to buy as well as questions on investment strategy and the economy. Every week, his comments and recommendations on the most intriguing questions of the past week go out to all Inner Circle members. And each week, we offer you one of the highlights from these Q&A sessions. While we reserve our buy-hold-sell advice for Inner Circle members, these excerpts provide a great deal of information and analysis on stocks we’ve covered for members of Pat’s Inner Circle.

Recently an Inner Circle member asked us about a Canadian agricultural stock that declined in the wake of the credit crisis of 2008. Alliance Grain Traders processes specialty crops and relies heavily on export markets, which were hard hit by the credit crisis. Pat assesses the company’s financial situation, its overseas expansion plans and its ability to rebound as international markets recover.

Q: Pat: What are your thoughts on Alliance Grain Traders? Thanks.

A: Alliance Grain Traders Inc. (symbol AGT on Toronto; www.alliancegrain.com), buys and processes specialty crops, including lentils, peas, chickpeas and canary seed, mainly for export markets.

Alliance has 29 facilities in Canada, the U.S., Turkey, Australia, South Africa and China. Its Turkish subsidiary also produces pasta and rice, plus foods made from bulgur wheat (whole wheat that has been cleaned, parboiled, dried and sifted).

In the three months ended September 30, 2013, the company’s earnings before one-item items rose 18.7% to $4.7 million, or $0.24 a share, from $4.0 million, or $0.20 a share, a year earlier. Revenue rose 15.1%, to $240.5 million from $209.0 million.

The gains largely resulted from a return to normal weather conditions in North America following the 2012 drought. Rising demand for lentils in India and Turkey also contributed to the improved results.

Overseas expansion continues with Beijing processing plant due to open later this year

As of September 30, 2013, Alliance’s long-term debt was $216.4 million, or 74.5% of its market cap. That adds risk. It also held cash of $22.9 million, or $1.15 a share.

The company continues to expand overseas. For example, it recently started building a new plant near Beijing that will process beans and export them to other countries. This facility should start up in 2014.

Due to the 2008 credit crisis, buyers of agricultural products opted for short-term contracts that met their immediate needs. Now that credit conditions have stabilized, buyers are moving back toward longer-term agreements. Canada has a good reputation on international markets, which is a plus for Alliance.

The stock is down from $31.57 in March 2011, although it has risen from a November 2013 low of $14.63 to $16.69. The quarterly dividend of $0.15 yields 3.6%.

In the Inner Circle Q&A, Pat looks at the outlook for a continued recovery in global agricultural markets as well as Alliance’s prospects for success in international expansion. He concludes with his clear buy-hold-sell advice on this stock.

(Note: If you are a current member of the Inner Circle, please click here to view Pat’s recommendation. Be sure to log in first.)

COMMENTS PLEASE—Share your investment experience and opinions with fellow TSINetwork.ca members

Most stocks suffered to some extent during the credit crisis of 2008 and the subsequent stock market slump. Did you hang on to any stocks that declined sharply at that time but came back to reward your patience? Did you make any sell decisions that you regret in retrospect?

Comments

Tell Us What YOU Think

You must be logged in to post a comment.

Please be respectful with your comments and help us keep this an area that everyone can enjoy. If you believe a comment is abusive or otherwise violates our Terms of Use, please click here to report it to the administrator.