High oil brightens ADM’s prospects

Article Excerpt

ARCHER DANIEL MIDLAND CO. $25 (New York symbol ADM; WSSF Rating: Above average) has gained over 40% in the past six months as higher oil prices have spurred new interest in ethanol, a gasoline additive made from corn that improves fuel efficiency and cuts harmful emissions. ADM is the world’s largest supplier of ethanol, and is now building more plants to meet the rising demand. Right now, only about 30% of U.S. fuels contain ethanol, so there’s plenty of room for growth. Most new car engines can also handle fuels with up to 85% ethanol, compared to the 10% blend that major gas stations now offer. High oil prices have also prompted ADM to build a new plant that will make plastic resins from corn and other crops instead of oil. Companies can use these corn-based plastics in food and pharmaceutical packaging and industrial products. It will take a year or two before the plant begins production. The stock trades at 16.6 times…

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