Archer (NYSE: ADM) may be the McDonald's (major industrial corporation) of the Old MacDonald business (farming). ADM's market cap is close to $24B and its Q2 2013 revenue was $22.5B (Financials obtained from gurufocus.com other information from ADM annual reports). ADM is a global food-processing and commodity trading company. It's not a fantastic industry, but it is a required one.
ADM operates in three main segments - Oilseeds Processing, Corn Processing and Agricultural Services. All the revenue in all these segments is generated by turning crops (corn, soybeans, etc.) into products (ethanol, high fructose corn syrup, soy proteins, etc.). These are somewhat complicated processes that most but the largest farm business would be unable to do for themselves. ADM is boring but necessary which can be exactly the type of business that could generate consistent and ongoing profits. ADM is a well established company with a dominant position in agribusiness. For instance, ADM is the biggest corn processor in the world and corn is the number one crop in the world.
Human beings have already been farming because the dawn of civilization, so it is not the type of business where you will see revolutionary changes. This means that MoneyArcher should be made out of incremental improvements. ADM features a good track record of delivering these. In fiscal year 2012.5 ADM freed up a thousand dollars of cash through inventory reductions, sales of non-core assets, and reducing collateral requirements on borrowings (unless otherwise specified, all numbers in this informative article are from ADM reports and investor presentations). ADM continued these improvements into H1 2013 and freed up another billion dollars. The Ab muscles existence of a fiscal year 2012.5 is another example of the type of incremental improvements ADM delivers. 2012.5 is a half year reporting period, which allows it to synchronize future reporting years with the tax and regulatory year. This can save time and money.
Agriculture is a fundamental part of the economy and can be - at the least until science finds a way for people to execute photosynthesis (and even then corn has a variety of industrial uses). ADM's middleman position provides diluted exposure to this important sector in exactly the same way that running a gold miner provides exposure to the buying price of gold. The relatively non-cyclical nature of agriculture makes ADM an excellent defensive stock (its beta is simply 0.41) and as I mentioned in Boring is Good, low beta stocks have a tendency to outperform the market in the long run. ADM is well diversified geographically, by crop, and in the services it provides. It will help ensure stability, helping to make long-term planning and improvements easier.
I'm constantly on the lookout for attractive DGI values. As the market rises, creating new record highs, this search is now more and more difficult. I know I complain about any of it from time to time, but in reality, as someone who's nearly fully invested, this frustrating search is really a fairly nice problem to have. Since a simple tenet of dividend growth purchasing a long term, equity-focused, buy and hold-type mindset, I suspect that many DGI investors have been in a similar boat.
The fear of missing out (FOMO) is a constant issue for several investors. It's the causes of irrational momentum to build in the markets, sometimes resulting in bubbles. In a market similar to this, investors who feel like they're underweight equities are constantly on the lookout for attractive values or strong momentum plays to hitch their wagons too. Oftentimes, I do believe, this results in getting stuck in value traps or buying shares when they're too high. Thankfully, this isn't really an issue that dividend growth investors have to cope with because of their equity-heavy, long-term focus. But even so, I'm sure that I'm one of many in looking for deals.