Soy Numero Uno
By Paul Price of Market Shadows
Bunge Limited (BG) is the world’s largest processor of soybeans. It is also a major producer of vegetable oils, fertilizer, sugar and bioenergy.
When commodities got hot in 2007-08, Bunge’s EPS shot up and the stock followed, rising 185% in 19 months.
The Great Recession took its toll on operations, dropping EPS to a low of $2.22 in 2009. Since then profits have recovered. They ranged from $4.62 – $5.90 in the latest three years. 2014 appears poised for a large increase. Consensus views from multiple sources see BG earning $7.04 – $7.10 this year and then $7.83 – $7.94 in 2015.
The shares have been holding a trading range over the last 12-months as the ‘show me’ crowd wants another quarter or two of good comparisons to become believers again. I’m already convinced after seeing Q4 come in at $1.35 versus $0.57 year-over-year.
Market Shadows Virtual Put Writing Portfolio sold one contract each of the Jan. $80 strike put for 2015, and 2016 at $5.91 and $9.38 per share. The ‘if put’ prices look very attractive at $74.09 and $70.62 respectively.
Our maximum profit is 100% of the premium collected. That will occur if the puts end up expiring worthless because BG remains above $80 on the expiration dates. In a worst case scenario we’ll end up owning 100 or 200 shares of Bunge at a price well below today’s quote and for a moderate P/E.
You can now follow these trades on the open positions list in our Virtual Put Writing Portfolio which has been showing outstanding results since we started it up in January of 2013.
Check out all our closed-out and current option trades to judge for yourselves if option selling is something that would work for your own situation.
