Ethanol still driving ADM's shares higher
Money Manager Highlight | Archer Daniels Midland Co. | Friday close: $41.99
The pickBirkelbach
owns 10,000 shares of the Decatur-based corn and soybean processor. He
has bought his shares over the last three years at an average cost of
$30 each. He says the stock could climb above $50 within the next year.
The reasons
ADM is the world's largest
corn processor, and its shares have risen 80% over the past 12 months
as sales of ethanol, a corn-derived gasoline additive, soared. "There's
tremendous demand for switching from oil to biofuels," Mr. Birkelbach
says.
Global demand, especially from China, for a range of raw materials the
company processes, such as soybeans, corn and wheat, will continue to
fuel growth.
The risks
The company would be hurt by
a drop in commodity prices. ADM uses futures contracts to hedge against
risk, such as a drought driving up the cost of corn or wheat. If it
bets wrong on its contracts, it would be stung.
©2006 by Crain Communications Inc.
