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We follow an approach to investing that focuses on broadly diversified investments in undervalued stocks for their long-term appreciation potential. Does that mean we build portfolios of 20 stocks, or perhaps 30? It's more like 50 and up. We like stocks, and we like a lot of ‘em. One such stock is Archer-Daniels-Midland Co. (ADM), notes John Buckingham, editor of The Prudent Speculator.

We don’t rely nearly as much on “how many” as we do “in which,” but we tend to invest in far more names than most. This expansive diversification, we find, potentially serves us well in two ways. We can further minimize the risk of individual stock ownership, while maximizing the likelihood of finding the truly big winners among the undervalued masses

Archer-Daniels-Midland Co. (ADM)

Archer-Daniels-Midland is one of the largest global agricultural processors and food ingredient providers. However, as a refiner of various agricultural commodities like soybeans and corn, we have to acknowledge the cyclical and often volatile nature that characterizes Archer-Daniels-Midland's businesses.

Indeed, lower pricing and execution margins, as well as lower mark-to-market timing impacts, were behind a drop in adjusted EPS to $1.46 in Q1, versus $2.09 in the year-ago period.

Still, input and manufacturing costs improved, while we think trends supporting long-term demand growth in agriculture remain intact. Shares have recovered some of the ground lost following a probe by regulators into the company’s accounting earlier this year, but we believe they remain in bargain territory, trading for 11 times EPS expected this year and the next. Also, the dividend yield is north of 3% and management repurchased over $1 billion of stock in the latest quarter.

My recommended action would be to consider buying shares of Archer-Daniels-Midland.

About the Author

John Buckingham joined AFAM Capital in 1987 and Kovitz in 2018, as part of the Kovitz acquisition of AFAM. He has more than 30 years of investment management experience and serves as editor of The Prudent Speculator, which has been a trusted newsletter for over 40 years.

Mr. Buckingham chairs the AFAM Investment Committee, leading a team that performs comprehensive investment research and financial market analysis. He has been featured in Barron's, The Wall Street Journal, and Forbes, and frequently contributes to CNBC, Bloomberg, and Fox Business News. Mr. Buckingham is a recognized industry contributor who regularly speaks at prominent industry seminars and events.

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