Bunge Has Gone From Worthy To Compelling

It's difficult to buy equities in a lousy market, but if you truly believe, and have discipline, that you will hold the securities for many years then it becomes easier. Remember I said easier, not easy, as you will kick yourself with each market swoon. But, you ought to make money. Since I think we'll stay in a difficult market for a long time, it's obviously better not to bet the farm at one time as the market will continue to give you opportunities at lower entry points, so scale into a company like Bunge.

Not too many years ago, during the great fertilizer mania, BG was selling for about $140. Today you get to buy it at about $49. That's still higher than was available at the bottom, but still an excellent entry price. Espescially since Bunge is significantly changed since that time. It has ramped up it's sugar and ethanol production in Brazil through an acquisition and, just days ago, closed the sale of its ferilizer mining operation, keeping retail.

BG will net $3.5B from the sale and use at least $1.5B to reduce debt. If they decide to use it all, they could almost be debt free. Before the sale, today's price was about 85% of book and I'm guessing that when we see the quarterly numbers, book value per share will be higher than last quarters's $55 per share. It never hurts to buy at less than book. On the earnings front, they project 2010 earnings of between $5.30-$5.70, say $5.50. At a share price of $49 you are acquiring an ag leader for less than 9 X earnings. And you get a large exposure to Brazil.

Bunge pays a dividend and has a good coverage ratio, is an excellent grain merchandiser, has some leading brands overseas, now has an ethanol component, possesses a good balance sheet, and is the best ag name to own. Much more attractive than ADM or Corn Products, a company that BG could take another run at with their new cash horde.

Buy a little here and more later and eventually you'll be happy. You can't get beat up too badly in the interim like you can, and will, on those 15-20X P/E companies.