Dear PGM Capital Blog readers,
In this weekend's blog edition we want to discuss some of the most important events that happened in the global capital markets, the world economy and the world of money in the week of May 4, 2015:
- China overtook USA as world biggest Economy.
- Q1-2015 earnings report of Archer Daniels Midland Company (ADM).
CHINA NOW WORLD NO1, WORLD ECONOMY (P.P.P):
According with data from the International Monetary Fund (IMF), as can be seen in below table, the Chinese economy in December 2014, was US$17.6 trillion, slightly higher than the US$17.4 trillion of the USA.
The IMF calculated these figures by using purchasing power parity (PPP) which enables you to compare how much you can buy for your money in different countries. As money goes further in China than in the US, the figure for China is adjusted upwards.
Q1-2015 RESULTS OF ARCHER DANIELS MIDLAND:
The Archer Daniels Midland Company (ADM) is an American global food-processing and commodities-trading corporation, headquartered in Chicago, Illinois.
In 1902, George A. Archer and John W. Daniels began a linseed crushing business in Minneapolis, Minnesota. In 1923, Archer-Daniels Linseed Company acquired Midland Linseed Products Company, and the Archer Daniels Midland Company was formed.
Currently, the company operates more than 270 plants and 420 crop procurement facilities worldwide, where cereal grains and oilseeds are processed into products used in food, beverage, nutraceutical,industrial, and animal feed markets worldwide.
The company also provides agricultural storage and transportation services and is also a leading supplier of Biodiesel, ethanol, special fats and feed and fertiliser.
It was named the world's-most-admired food-production company by Fortune magazine for three consecutive years: 2009, 2010 and 2011.
Q1-2015 Earnings report:
On Tuesday May 5, the company reported adjusted earnings per share of US$0.77, up from US$0.55 in the same period last year. Adjusted segment operating profit was US$883 million, up 12 percent from US$789 million in the year-ago period. Net earnings for the quarter were US$493 million, or US$0.77 per share, and segment operating profit was US$855 million.
On Thursday, May 7, the Board of Directors declared a cash dividend of 28.0 cents per share on the company’s common stock payable June 11, 2015, to Stockholders of record May 21, 2015.
PGM CAPITAL COMMENTS:
China now world's biggest economy:
For the first time in more than 140 years, the US has lost the title of the world's largest economy.
Just 15 years ago, the U.S. A produced nearly three times as much as the Chinese
China now accounts for 16.5% of the global economy when measured in real PPP (Purchasing Power Parity) terms, compared with 16.3% for the U.S.A.
It is worth mentioning, that in their updated GDP (P.P.P.) ranking of world's economies, the CIA also shows that China in 2014, became world's biggest Economy as can be seen from below table.
We believe that the year 2015, might be THE YEAR for China.
With the upcoming rebalancing of the IMF SDR basket this year, for which we believe that the Chinese Yuan, will be included in this prestigious IMF reserve currency basket, we believe that this will have an upwards pressure on the value of the Yuan against the other mayor world currencies.
This will increase the purchasing power of the Chinese people, which will have positive effect on most Chinese companies, specially their 3 mayor Oil Companies.
Archer Daniels Midland:
Below chart shows the all-time chart of the stock of company.
It is also worth mentioning that the company has increased its quarterly dividend in the past 10 years from US$ 0.085 a share in Q1-2005 to US$ 0.28 in Q1-2015, which is an increase of over 220% in 10 years.
Based on the above, the company business model, its, P/E ratio of 14, P/B of 1.64 and a strong balance sheet we have a BUY rating on the stock of the company.
Last but not least, take into considerations that markets can stay irrational longer than you can stay solvent and before following any investing advice, always take your investment horizon and risk tolerance into consideration and keep in mind that stocks of commodities producers as well as markets of emerging economies can be very volatile and that sharp corrections may happen in the short term.
Until next week.