Patience is a virtue
Today's Financial News - Posted November 5, 2008
The nation is suffering from a deadly mental flaw. Because we want success and power sooner than later, we are paying an exorbitant price. Fortunately, companies like Archer Daniels Midland (NYSE:ADM) are smart enough to know better.
By Andrew Snyder
Baltimore – (TFN): The recent financial crisis has created some interesting new buzz words. Seemingly every article within the nation’s financial newspapers contains words like TARP, bailout, and Main Street. And thanks to Joe the Plumber, the term socialism has not been this popular in decades.
Even with all the overused jargon, my favorite term is one I think we will be hearing much more of in the next few months. “Short-termism” is a great way to describe many of the flaws weighing on the shoulders of this great nation.
When Americans want something, we want it now. We want our big house with a white picket fence, and we want it now. We do not want to have to wait until we have a sizeable down payment or a job that pays well enough that we can afford it.
When we want a new car, we want it now. We will not wait until we can buy it with cash.
And most importantly, when we want our economy to get back on its feet, we want it now. That is why we are constantly bombarded with terms like bailouts, TARP, life preservers, and rescue packages. Americans are willing to risk everything as long as it will provide positive short-term results.
Short-termism is a deadly disease that could kill an investor’s shot at success.
Fortunately, the short-termism pandemic has not affected everybody in this country. There are still plenty of investors and companies looking for strong, long-term returns.
One of them, surprisingly, is Archer Daniels Midland (NYSE:ADM), the company known for its huge stance in the heart of the bubble of all bubbles, the ethanol industry.
As you probably know, the nation’s ethanol industry has all but dried up. The hype we saw 24-months ago is gone. The profit potential is nearly nothing. And, because they focused solely on short-term profits, many of the industry’s largest players are in bankruptcy or darn close to it.
But ADM is different. In fact, it is doing surprisingly well and is even increasing its stake in the world’s ethanol industry.
Why is it running into an industry when everybody else is running out?
ADM is one of the industry’s only companies that focus on long-term profitability. It is using the recent ethanol bust as an opportunity to strengthen its stance, increase its competitive moat, and buy its competitor’s assets at rock-bottom prices.
Life after tomorrow
Investors once debilitated by short-termism are finally starting to see the logic behind ADM’s maneuvering. Yesterday’s blow-out earnings report, which showed the company more than doubled its first-quarter profits, helped prove to many investors ADM is a long-term leader. Since the report, share price has risen by about 20%.
Of course, ADM is involved in a lot more than ethanol, it is a global commodities powerhouse, but the biofuel sector is getting a lot of the company’s attention. In fact, just yesterday executives announced the company is investing $370 million in Brazil’s ethanol market.
When one industry is sagging, good companies look for opportunities elsewhere. Instead of begging the government for bailout assistance or closing shop, ADM’s superb management team put on its long-term glasses and searched for better opportunities.
The company has a great shot at success throughout the world as alternative energy grows from short-term hype to a long-term power industry.
Even if Obama makes good on all of his immense promises, the nation is not going to be “green” by 2010 or even 2020. But you can bet, in the long run ADM will be competing with the likes of Exxon Mobil (NYSE:XOM) in a drastically greener America.
If you want to get rich and stay rich, you have to treat short-termism like an evil enemy. The mental flaw will do you no good.
Next Article: Obama Presidency: Investors flee overseas
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