Ag Growth International Inc (AFN.TO)

Sold his holdings recently, on valuation more than anything. Doesn’t think the dividend is in trouble here. A very high quality business.

This has about an 83% payout ratio with a dividend yield of about 6%. They missed on their top line in Q1, but are guiding to a stronger 2^nd half. The balance sheet is a little stretched at 3.7X net debt to EBITDA. Thinks this is one that you could own here. Dividend yield of 5.7%.

(Market Call Minute.) This ranks well for him.

(A Top Pick June 18/15. Down 12.48%.) Manufactures equipment to store and handle grain, and are growing globally. A great theme, because there are so many developing countries that have decrepit or no infrastructure compared to what we have in North America. Just made an acquisition in Brazil and are selling more and more into Eastern European countries. Very well-managed. If you want a good, global growth company in agriculture and not dependent on the commodity cycle, this is your best bet. You get a good 6% safe yield.

There has been a very sluggish farm equipment environment. Q1 earnings came in a little bit light. However, management expects a more typical buying pattern to begin in the 2^nd half of this year. Has an 83% payout ratio so your 6% dividend is safe. They have a lot of operating efficiencies in place.

(Top Pick April 23/15, Down 25.22%) They made what he thought was an accretive acquisition with a nice US$ tail wind. The problem was a drought last year. Then finally the demand for Canadian small caps dried up and this one got oversold.

Equipment for processing cereals. Grain handling and storage. It has come back from its low, rather like POT-T. Farmer’s incomes have lagged so they can’t buy as much. You have to be positive on grain volumes to fill new grain storage bins.

(Market Call Minute.) Wouldn’t be real high on this right now. It would probably be a Sell for him based on the fact that there haven’t been great conditions for farmers, so they don’t have a ton of cash flow.

Holds this in the income side of portfolios, where he looks for dividend growth. The acquisition of Westeel was great, and gave them a huge market share in Canada. They’ll be able to cross sell their bins. Following the drought in Canada that affected the amount of grains coming out, and the issues of potash prices, it got to a level that didn’t make any sense. Management indicated they are not going to cut their dividend. They are also making acquisitions in Brazil, which is really smart. Feels the dividend is safe.

(Market Call Minute.) This is a tough one. He owns a small position. Wouldn’t add any right now, but in the long-term you will make money in this sector.

POT-T is very much a commodity business and can’t control prices any more. He prefers the equipment side like this one. They have smaller, less costly items that have to be replaced more often. Sales are booming in South America. This is a great buying opportunity where it has just bottomed out.

Earnings estimates chopped by 22%. Analysts are still optimistic for a 46% growth in the second half of this year, but he is not positive given that earnings are currently down 69%.

Agricultural infrastructure. They make storage, augers and conveyors. There have been concerns as crop prices and farmers’ income has come down, so are not ordering as much. They are trying to expand their Brazilian operations. Have been in the Ukraine area for a number of years, which is a good area, except they are larger projects and take longer to find and get. Recently appointed a new CEO, so he is watching to see what he is going to do.

A core holding. Every few years farmers hold off from their purchases. Farmers will have to pay up down the road. Storage is a huge problem around the world and there is a huge market for their equipment. He bought recently.

This is suffering from low crop prices. They do a lot of the smaller machinery that farms would purchase. Very leveraged to the US market. Longer-term they are well positioned; it is just really a broader call on the agricultural cycle right now. It’s on her watch list. Dividend yield of 8%.