Today offers a great opportunity in Archer Daniels Midland Company (ADM)
music selection: “People Are People” — Depeche Mode
ADM has a huge tailwind behind it over the next decade. What is happening is that India and China are going to add about a billion people to the Middle Class. History shows as people enter the Middle Class that add more meat to their diets. This is good news for ADM as chicken, pork, and beef use a lot of grains. China and India will need to consume more grain per capita which will drive the price for their products higher. No firm is better positioned to take advantage of this than the company they call “Big Corn.”
As always, I am targeting an expiry about 6 weeks out: ADM151016P00043000. Target price is 1.50, in the middle of the bid/ask spread. I will have 1.61 in downside protection. The trade will be open for 43 days. The annualized yield will be a ginormous 29.61%.
If assigned, covered calls will be written but well out of the money. I want to hold this one for a long time to take advantage of the growing dividend yield, a generous share buyback program, and the demographic trend in China and India. I do not want to be called away for cheap.
Devour your prey raptors!