AT&T Inc. (T), Bunge Ltd (BG): Beat the Taper, Part II

Hunting for black gold will always be lucrative

Ocean Rig is up next. Set to benefit from rising demand for ultra-deep-water drilling over the next few decades or so, Ocean Rig looks like a great long term investment.

Ocean Rig is one of the most undervalued oil & gas drilling companies in the sector and the company is still trading at a discount the value of its assets; worth $22 per share. Debt stands at 6.2 times EBITDA, although this looks to be manageable as the majority of this payment comes after 2016 with smaller repayments due in 2013 ($301 million) and 2014 ($341 million). Free cash flow should be in the region of $300 million a year for the next few years.

In addition, Ocean Rig already has 6 years’ worth of revenue lock in with its order back log. So, although I hesitate to say it, the company’s revenue is almost a certainty and the future looks bright.

Farming will always be in demand

Bunge Ltd (NYSE:BG) is my third and final choice as it is a solid play on global growth. Although the company missed estimates for second quarter earnings, management believe that there is plenty of potential ahead in the third and fourth quarters as record harvest in the US boost processing and trading volumes.

There are also positive signs for the company in Brazil, where yet another year of record crop yields are predicted after excessive planting following the US drought last year.

Bunge Ltd (NYSE:BG)’s earnings are highly volatile and the company’s performance is linked more to the movement in crop prices, environment and farm yields than anything else so the company does not have clear future.

However, rising populations and limited farmland dictate that the long term outlook for the company is positive. In particular, as many crops such as sugar and soy are currently trading at very low prices due to record crops from the US and Brazil. These prices are not going to stay low, however, as many farmers are losing money at these prices and excess supply should dissipate over the next two years, boosting crop prices and Bunge Ltd (NYSE:BG)’s profits.

Foolish summary

All in all, the next few months will be bumpy as the Fed withdraws stimulus that the market has been addicted to over the last few years. However, investors can seek protection in these six companies, which all show potential for long-term growth and little reliance on the Fed’s policies.

The best investing approach is to choose great companies and stick with them for the long term.

The article Beat the Taper: Part 2 originally appeared on Fool.com and is written by Rubert Hargreaves.

Fool contributor Rupert Hargreaves has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Rupert is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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