Local agribusiness stock price doubles

4/2/2006

Pumped by investment fertilizer, the stock price of a widely respected local company has been growing, leading investors last week to call area brokers in big numbers to see if they should harvest a few shares.

The near uniform answer: The Andersons Inc. is a good stock, worth a look, but wait until the latest hype about the stock settles down.

Shares jumped 17 percent in the first four days of last week, finishing Friday at $78.23, more than double the price of six months ago and four times the price of two years ago.

How high the stock may jump, or whether it will drop, is anyone's guess. Brokers were reluctant to forecast.

Some say the Maumee company's ethanol projects and railcar business bolster its strong grain handling operations and healthy earnings. Others say the recent stock run-up is bound to burst, dropping the price.

"When you come back to the fundamentals, it's still reasonably priced," said Michael Holly, manager of the Spring Meadows branch of Wachovia Securities Financial Network. "But I'm cautioning my clients, 'Don't get too excited, too fast. Wait for all the hype to die down.' "

Said Mark Hughes, an analyst with Lafayette Investments in Maryland: "It seems the higher it's going, the more excited some people are getting. My opinion is the opposite: The higher it goes, the more cautious I am in my buying."

His company sold the last of its Andersons stock Friday, for at least four times the purchase price. Other shares were sold earlier, also at a profit.

Two analysts who carefully follow the company have a "buy" recommendation on the stock.

Officials of the suburban Toledo company said the jumping stock price has been exciting.

"We're very pleased with what's happening, and we're proud of our people," said Gary Smith, company vice president and treasurer.

As for whether a stock split is being considered, he declined comment. "We'll share whatever information we'll have with everyone at the same time."

In February, the company said there had been no serious discussion of a split, which would divide a holder's existing shares into more shares, and the price likely would similarly adjust.

Shares in The Andersons sold steadily for $8 to $15 for the first eight years it was listed on Nasdaq. In 2004, the stock passed $20 for the first time. Last year, it continued to rise, exceeding $40 by November. It cracked $50 and $60 in February and $70 last week.

It toyed with $80 but didn't close over that threshold.

Driving last week's sharp increase apparently was a noted stock-picker who touted it on his national television show and Web site. Getting into ethanol production, as the company is doing, was what prompted the recommendation from Jim Cramer of TheStreet.com.

Typically, 20,000 to 40,000 shares - trading under the symbol ANDE - are exchanged on a given day, but last week more than 200,000 shares were traded on each of three days. The company has 7.4 million shares outstanding.

Ethanol, a corn derivative that is processed to add to gasoline, cutting down on the amount of petroleum needed, has been a hot commodity lately. Some tout it as a way to lessen America's dependence on foreign oil, even though high-ethanol gasoline gets poorer mileage than regular gas.

The Andersons started building two large ethanol plants last year. The company's purchase of railcars in the last two years is a small but profitable side business.

G. Thomas Damasco, chief executive of Modern Portfolio Management in Maumee, cautions clients not to buy too much of any one stock. And he was particularly scathing toward national commentators who can attract day traders and swing a stock price simply by his utterances.

"I call it financial pornography," he said. "It's a lot of noise and some people get caught up in that."

Bob Heisler, investment representative in the Sylvania office of Edward Jones, said, "Ethanol is the hot thing right now, so I have been getting a lot of calls from clients asking, 'Should I buy more, should I sell, what should I do?' " He tells clients not to buy too much and recommends stop-loss orders, which instruct the broker to sell a client's stock automatically when it drops to a certain price, thus limiting losses.

The national attention The Andersons is receiving is especially gratifying because when the stock was introduced in the mid-1990s it was lost in the dot-com frenzy gripping the nation, said Mr. Smith, company treasurer. But now, he explained, "we've had two back-to-back record years and ethanol is a very interesting and timely investment right now."

Still, Mr. Hughes, the analyst, said the company has issued no profit projections on its two ethanol plants.

"It looks to be a good story, but we won't know for at least another year," he said.

Contact Mary-Beth McLaughlin at: mmclaughlin@theblade.com or 419-724-6199.