In that same report, Bunge’s management has also cited that the aforementioned ethanol business is another area to expect growth, as the Brazilian “government has moved to increase gasoline prices, which has a follow-on affect to ethanol pricing and demand.” Needless to say, these factors at least partially explain why Wall Street expects earnings to expand by nearly 80% this year, with a long-range EPS forecast of 11% a year through 2017. Like NRG Energy Inc (NYSE:NRG), this potential is relatively cheap; Bunge trades at a forward P/E below 9.
Goldcorp
In Goldcorp Inc. (USA) (NYSE:GG), the hedge fund disclosed a holding that contains 3,779,050 shares, worth $127.1 million. In the previous 13F, Carlson Capital reported an $82.8 million stake, which involved 2,255,100 shares. With the largest market cap in the gold industry (a member of the basic materials sector), shares are expectedly down by more than 20% year-to-date as bullion prices have floundered.
Bank of America Corp (NYSE:BAC) has issued a report claiming that it expects the price of gold to hit $2,000 per ounce by 2016, “even if investors bought only a third of the gold they purchased in 2012.” As gold goes, so do its miners, and it’s likely that Carlson is betting a BofA-type scenario here.
Besides the fact that Goldcorp Inc. (USA) (NYSE:GG) is one of the largest bets on a rebound, the company also pays a decent dividend yield of 2.0%, and trades at a book multiple near parity. A PEG ratio close to 1.0 also indicates that Mr. Market is undervaluing Goldcorp’s earnings potential, which the sell-side expects to average EPS growth of 16% a year over the next half-decade.
It’s possible that the company can still hit its full-year earnings outlook despite the fact that bullion is down over 17% in 2013, and one of the most underrated areas in its staple is in Mexico’s Guerrero region, specifically at its Los Filos mine. Inflation in Mexico has also assisted the company’s tax outlook in this area, and according to its latest earnings report, Goldcorp expects a 29% effective tax rate for the full year of 2013.
According to last year’s data, this would be below the likes of Yamana Gold Inc. (USA) (NYSE:AUY), Barrick Gold Corporation (USA) (NYSE:ABX) by 4-5 percentage points, and on par with Kinross Gold Corporation (USA) (NYSE:KGC). These figures aren’t an end-all-be-all reason to invest in Goldcorp, but it’s something most investors aren’t talking about; we’ll be watching closely.
Final thoughts
Chances are, if you’re reading this, you may share a similar sentiment as Carlson. That is, you might be bullish on the energy, agriculture and gold markets. What’s less likely, though, is that you’re invested in this trio of areas in the same manner as this hedge fund. Down a significant amount in 2013, Goldcorp might not be the top pick of many gold investors expecting a rebound, but the company’s potential tax advantage—and fortuitous earnings forecast—might be worth looking into. Likewise, the Virgin Media opportunity has already passed, but Carlson’s investments in Bunge and NRG Energy Inc (NYSE:NRG) are intriguing, as each offers a set of company-specific reasons to be long over at least the next year.
Disclosure: none
