AGT Food's Recent Stumble Has Created Some Indigestion, But Also An Opportunity As Expectations Reset

I had my concerns with AGT Food and Ingredients (OTCPK:AGXXF) (AGT.TO) back in October due to issues with the valuation and popularity of the stock and management's questionable strategic decisions, but I wasn't really expecting the 30% fall in the shares that has taken place. A lot of issues were pressuring the shares, including concerns about global harvest levels and harvest quality, Indian import actions, and growing impatience with the slow ramp of the Minot business, but the surprisingly weak first quarter results took 20% out of the stock relatively quickly.

Here, with AGT Food, we have a good example of the challenges that come with "buy the dip" advice. Stocks don't pull back 20%-plus relative to their benchmark index because everything is going awesome with the company. The trick, then, is to separate investor panic from real issues that mean investors should avoid a stock.

I am worried that AGT will have a rough year, as although I expect the second half of 2017 to be stronger, there will likely be some follow-on turbulence in the second quarter and maybe into the third. I also still don't really like the expansion of the bulk handling business, and I think there are some valid concerns as to whether the potential of the Minot-based ingredient business hasn't been overestimated by investors and sell-side analysts. All of that said, today's price assumes only mid-single-digit revenue growth and low single-digit FCF margins, and if AGT can ultimately lift margins closer to 5%, a fair value above C$36 is still in play.

Investors should be aware that the Canadian shares of AGT Food offer far greater liquidity and should be relatively easy to buy through most brokerages.

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AGT Food's Recent Stumble Has Created Some Indigestion, But Also An Opportunity As Expectations Reset

Seeking Alpha: The Easy Part May Be Over For Vedanta Resources

India-focused Vedanta Resources Plc (OTCPK:VDNRF) (VED.L) has come along pretty nicely since I identified it as an undervalued resource company back in December of 2013. After a 20% run that has outpaced peers like Glencore Plc (OTCPK:GLNCY), Rio Tinto (NYSE:RIO), and BHP Billiton (NYSE:BHP), I'm not quite so bullish on the shares. Although Vedanta has much to gain from more efficient operations, a more pro-business government in India, and stronger base metal prices, ongoing operating challenges in copper, aluminum, and iron ore are not to be ignored. There's still a lot of self-improvement potential here, but it won't be light work and investors will have to have some patience.

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The Easy Part May Be Over For Vedanta Resources

Seeking Alpha: First Quantum Minerals Shooting For The Top

I can't complain about First Quantum's (OTCPK:FQVLF) (FM.TO) (FQM.L) performance since my Top Idea write-up in December of 2013, as the shares have risen almost 50%. First Quantum is far from the only base metal miner to do well over that stretch, as others like Hudbay Minerals (NYSE:HBM), Lundin (OTCPK:LUNMF), and Kazakhmys (OTCPK:KZMYY) have also done quite well. Even so, I love the company's ambitious plans to grow its way into the top ranks of global copper and nickel producers, as well as its demonstrated excellence in bringing mines into production on-schedule and close to budget.

I do believe that First Quantum is in a stronger position than it was eight months ago, but not nearly so strong enough to offer the same sort of bargain. I've moved my fair value estimate up a bit, but First Quantum looks more like a growth-oriented "hold" than a strong buy at this point.


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First Quantum Minerals Shooting For The Top

Seeking Alpha: Teck Resources Hunkering Down

Whether it's BHP Billiton (BHP), Glencore (OTCPK:GLNCY), or Anglo American (OTCPK:AAUKY), the basic story of weak commodity prices is dominating the investing environment. It's even worse for Teck Resources (TCK) as this Canadian mining company is very heavily weighted toward metallurgical coal and prices continue to scrape along the bottom. Teck Resources has the benefit of unusually low production costs for its major products (coal, copper, and zinc), but this low price environment is pushing the company to cut costs and curtail expansion projects and leading investors to worry about the dividend. I do like this stock as a way to leverage better base metals and an eventual recovery in met coal, but there is room to quibble about the fair value today.

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Teck Resources Hunkering Down

Seeking Alpha: Glencore PLC: A Mining Major With A Different Approach

Switzerland-based Glencore PLC (OTCPK:GLNCY) has certainly taken a different road on its way to becoming one of the world's mining majors. Glencore has no iron ore exposure at present and has instead built around quality base metal and copper assets. Glencore also has extensive agriculture assets and one of the largest physical marketing operations in the world. The shares do deserve a premium for that marketing business, and though the shares may not look like much of a bargain from an EV/EBITDA perspective, there's still credible value here.

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Glencore PLC: A Mining Major With A Different Approach