Seeking Alpha: Graincorp Not Strikingly Cheap Amidst Multiple Challenges

Continuing my global tour of ag companies, today's subject is GrainCorp (OTCPK:GRCLF) (GNC.AX) - an Australian grain handling/storage company that is also a significant global player in malt and a regional player in edible oils. GrainCorp is probably best known as the target of Archer Daniels Midland's (ADM) unsuccessful takeover attempt in 2013, as the Australian government wanted to protect a "national champion" in a strategic sector.

GrainCorp doesn't appear to be the investment opportunity that I had hoped to find. Not only is the company facing near-term challenges from a potential El Nino weather cycle and global overcapacity in the malt industry, there is also growing competitive risk as rivals are building their own east coast port facilities. I do believe that GrainCorp still holds a lot of value for a company like ADM, and I believe the government of Australia could be more receptive to a takeover bid a few years from now, but I don't generally like investment situations where so much of the value is underpinned by future M&A potential.

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Graincorp Not Strikingly Cheap Amidst Multiple Challenges

Seeking Alpha: Despite Challenging Conditions, Investors Buying Anglo American's Self-Improvement Potential

These are not particularly easy times for Anglo American plc (OTCPK:AAUKY). Copper prices have been holding up, but iron ore has been weak, met coal remains weak, and the company's platinum business has been hit by a major strike. Even so, Anglo's share price is within 10% of its 52-week high due in part to optimism regarding the long-term potential of the company's restructuring efforts. Anglo American shares don't look too expensive today, but investors do need to appreciate the elevated operating risk relative to names like Rio Tinto (RIO), BHP Billiton (BHP), and Glencore Xstrata (OTCPK:GLNCY).

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Despite Challenging Conditions, Investors Buying Anglo American's Self-Improvement Potential

Seeking Alpha: Nyrstar Far From Health

It's not hard to find a base metal mining or smelting company whose stock is down over the last twelve months. In fact, the bigger challenge is finding a winner. So it's not necessarily an unforgivable black mark against Nyrstar (OTC:NYRSY) (NYR.BR) that the shares have been so weak (down 30%) over the past year.

The bigger problem here is that the company has made a series of poor capital allocation decisions and may well find it next to impossible to cut costs to a point where the returns from the business are attractive again. But there's another side to the story, one that may appeal to more trading-inclined investors. This is one of those rare stories where almost every sell-side analyst covering the stock is negative on it (either rating it a Sell/Underperform or a weak hold), and if zinc prices stage a recovery (and/or the company irons out its operational issues), these shares could bounce.

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Nyrstar Far From Health

Investopedia: With Freeport McMoRan, It's Time To Get Over It And Move On

I don't think it's an exaggeration to say that some percentage of Freeport McMoRan (NYSE:FCX) shareholders, or former shareholders, hated the company's decision to acquire Plains Exploration and McMoRan Exploration. These shares are down about 22% from the time just before the announcement, though miners like BHP Billiton (NYSE:BHP), Rio Tinto (NYSE:RIO), and Southern Copper (NYSE:SCCO) haven't fared dramatically better in what has been a pretty unpleasant market for basic materials stocks.

With the deals done, it's time to get over the disappointment regarding the oil and gas transactions and just accept Freeport McMoRan for what it is today – an incrementally more diversified natural resources company with a hefty amount of debt and high leverage to global economic growth. Given that I do not believe that the oil & gas properties will be value-destructive (in total) from this point on and that the valuation already prices in further copper price erosion, Freeport McMoRan stock does hold some appeal at these prices.

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