Update - June 13, 2023

A 200% Winner… and More Gains on the Way

The bull is back.

The stock market has once again proved that interest rates are everything… and that the Fed giveth and the Fed taketh away.

As rates rose and borrowing costs surged, the free-money machine slowed, making it much harder for companies to arbitrage low rates into easy profits.

But the Fed has hinted at plateauing rates… and maybe even cutting them by the end of the year (a scenario that gets less and less likely as stocks climb). Stocks have jumped higher in response.

Thanks to the action, our recent stake in Whirlpool (WHR) is already up 10%.

CCC Intelligent Solutions (CCCS) is up 30% since we got in.

And just this morning, KBR (KBR) officially became a triple… with shares rising 200% since we got in.

Congratulations.

Indeed, our strategy of focusing tightly on interest rates and investing in the assets best set to take advantage of their gyrations has paid off handsomely.

Today, though, I want you to take a closer look at a play that is likely to surge higher over the next few weeks. We’re already up 25% on The Andersons (ANDE), but some news that came out early this morning has me excited.

Two large commodity traders have announced they are combining their books and joining forces. Bunge (BG) will shell out $19 billion to get its hands on Viterra – an international grain trader.

If the deal is approved by the antitrust folks, it will create one of the largest ag commodities firms on the planet.

The move is part of a larger tightening in the space that will surely put a premium on shares of The Andersons – a company that owns 79 strategically placed trade facilities throughout the United States.

And while its four ethanol plants and its fertilizer operations make up a good portion of its annual sales, some 75% of the company’s revenue comes from commodities trading… exactly the business the two big boys above are involved in. In fact, commodities trading is The Andersons’ fastest-growing and most profitable business line.

There are several ways today’s news could help boost The Andersons’ share price.

The first is the simplest. It’s likely to happen regardless of where things go with the Bunge-Viterra deal.

In this scenario, The Andersons’ share price would rise simply because of the premium the market puts on companies working in the commodities space. When M&A activity is hot, prices rise thanks to the expectations that a company could receive a buyout offer.

The gains in this scenario wouldn’t be as big, but they’d be steady and long-lasting.

The second scenario is that regulators could smack down the Bunge deal. This could be much more lucrative for The Andersons. There are already worries about major pushback from the governments in Brazil and Argentina, where Bunge and Viterra control the majority of the market.

If that happens, both companies would likely look for alternatives to tie up with. Given its strategic position here in the States (that is far from a monopoly), The Andersons would be a strong target.

This would be our preferred scenario, as it could bring a quick payout of 50% or more. But there are many variables between here and there. It’s the less likely scenario.

Either way, though, today’s news is good for The Andersons.

We’re already up nicely on the play. And now industry consolidation is likely to add more fuel to the fire.

Continue to hold your shares.

This one could get red-hot.