New Portfolio Addition - 04/01/2025
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Archer-Daniels-Midland (NYSE - $ADM)
ADM is a global leader in human and animal nutrition and a premier agricultural origination and processing company. Its vertically integrated model spans Ag Services & Oilseeds, Carbohydrate Solutions, and Nutrition. This structure allows ADM to manage agricultural commodities from sourcing and storage through processing and sale, providing unparalleled capabilities to meet global demands driven by fundamental trends like food security, health and well-being, and the sustainability of the agriculture and food value chains.
While the Ag Services & Oilseeds segment, which accounts for a significant portion of revenue, operates on high-volume, lower-margin dynamics tied to fluctuating commodity prices, ADM's diverse segments, including the higher-margin Nutrition business, contribute to overall business resilience. The company acknowledges the cyclical nature of its profits influenced by food commodity cycles, but over the long term, its profits have trended upwards. The essential nature of its business, providing access to nutrition worldwide, creates a positive structural tailwind from growing global food consumption.
A cornerstone of my investment thesis for ADM is its remarkable track record of returning value to shareholders through dividends. ADM is a "dividend aristocrat," having raised its dividend for 52 consecutive years as of the 2025 proxy statement. Its history of uninterrupted dividend payments is even longer, spanning 92 or 93 years according to various sources. This consistency demonstrates a deep-rooted commitment to providing shareholders with a reliable income stream, even through various economic and commodity price cycles. The company has also returned significant capital through the combination of share repurchases and dividends, totaling $3.3 billion in 2024 and $3.7 billion in 2023. Because I’m unsure of the trajectory of the United States economy in 2025, I wanted to add a measure of stability and income to our portfolios.
I planned to add over a period of months, building to a 3% position. When we began buying in early April, my assumption was the stock would continue to fall as macroeconomic fears reverberated through the market. It is a blessing and a curse to report that has not been the case. Our average cost per share is $43.90. and the stock has appreciated roughly 10% since we started buying. We’re going to stay put on this one for now and wait for more opportunity later (or elsewhere).