Thursday, January 14, 2016

Weekly Purchase 13 - ADM

Rough Waters


With OPEC Price War, China, North Korea, terrorist attacks around the world, it is not surprising the market is taking a dump. The only certainty is higher volatility.


If you are on a boat, and the waves are going up and down like the market, you will definitely get sea sick. So, what do you do? Focus into the distance. Look for the horizon.


Control what you can. You take out your paddle and start paddling away. Adding a motor should help. In any case, don't give up.


For me, I just need to continue to invest regularly regardless of the market. With around 30 companies in my taxable portfolio, I am now revisiting all my positions and adding to it. Due to the market, I will be spending most of my time averaging down. In a couple of cases, I may need to hold off or even averaging up. However, these are only a few.




Details of Purchase


On Tuesday, I bought 15.19 shares of ADM.


Action
Security
Price
Quantity
Amount
Buy
ADM
$33.5699
45
1510.65


This purchase increases my forward annual dividends by $50.40.


You can read more about ADM here:


The last time I purchased ADM in this portfolio was in November last year with a price around 43. Now, the price I bought ADM is around 33. So, I am averaging down in the classical manner. My reduced cost basis is now around 37. The ADM position will bring in around $71 a year - which is not bad.


I will see if I need to average down further - but this won't happen until I cycle through my other positions.


The other thing I am looking out for is a dividend cut potential. I think ADM will hold out based on its history and its relatively low payout ratio.


What do you think of ADM?
D4s



12 comments:

  1. Like you I look off towards to horizon focusing down the road instead of the short term. I like ADM and have added to my position towards the end of 2015. Like you I like to average down when I can and have been doing so with EMR and BNS so far this year. Other names like CAT, TD and RY also come to mind. Thanks for sharing. Like the ADM buy.

    ReplyDelete
    Replies
    1. Divhut, thanks for your comment. The waters are choppy now. It's good to average down or to initiate new positions in companies that were too expensive.
      D4s

      Delete
  2. Congrats on the buy. I was eyeing ADM myself before my JNJ buy. A lot of discounts out recently with the negative news. We have to make smart plays now and keep focused on the long haul. Nice Job!

    ReplyDelete
    Replies
    1. Adam,
      Thanks! Smart plays are needed now to selectively pick the good ones. Opportunities are available. I may add to JNJ myself...
      D4s

      Delete
  3. Nice buy DivSon. I was a ADM shareholder until a year ago. The stock is getting down to a level where I'll give it another look. When I sold it, I was discouraged by the extremely high exposure the company had to Ethanol production. If it wasn't for the Ethanol game, i would still probably be a shareholder.
    -Bryan

    ReplyDelete
    Replies
    1. Bryan, Thanks for your comments!
      Yes - I agree with you on the exposure to ethanol. It is very much a commodity company - so definitely it is cyclical. So, not for everyone like JNJ - but okay if you can live through the cycles of ups and downs.
      D4s

      Delete
  4. Div Son,

    Nice purchase! I picked up a few shares yesterday as well. Mid 3s yield and dependable dividend growth is a great combo. I'm looking forward to your next purchases.

    MDP

    ReplyDelete
    Replies
    1. MDP,
      Thanks! The 3% yield and dividend growth are nice bonuses. It good to buy this at low valuations - though I am not sure how low it will go. I will just buy into this position over time.
      D4s

      Delete
  5. Solid long-term investment on a company with a great history of dividend increases at a great price.

    ReplyDelete
    Replies
    1. Thanks Div Chimp!
      I checked ADMs yield, and it is similar to the 2008 numbers - meaning that it is lowest it has been since the Great Recession. One important point us that ADM kept growing it's dividends. The question is if they will continue to increase. I think yes - but we shall see.
      D4s

      Delete
  6. I am also long in ADM. The only problem is that in next quarters (1Q, 2Q) results should be weaker y/y and with weaker results share price in my opinion will not raise significantly. But the good point is that 2Q should be better than 1Q, which is why I am long ADM :)

    what do you think about acquisitions e.g. Harvest Innovations? Do you assume that management is doing right things for company and do not analyze it deeper? Cause I am wondering whether with such low share price it is good idea to buy other companies instead of giving more money on buybacks...

    best regards!

    and btw. D4s Valuation Tool - great tool!

    ReplyDelete
    Replies
    1. Dividend Time,
      Thanks for your comments! I am glad to be a fellow shareholder!
      For ADM's management, it has been almost a year for Luciano, and I think it has been mixed. I do check M* opinions on Management's ratings, but overall this is a difficult metric to determine.
      Concerning the share price, there will be some weaknesses for a while. If you hold it for long term, then this will be fine since the dividends should be okay in the short term.
      I'm glad you like the tools. Hopefully, I will have time to release more stuff.
      D4s

      Delete