Bunge is a $12 billion market cap agriculture middleman, processing, distributing, and selling products along the food value chain. The stock was a huge winner during the commodity boom from 2002 to 2007, but has been a much less volatile stock in the past few years.
However, the stock broke out to a new 5 year high this week:
The catalyst for the recent strength was a much better than expected earnings report in late July, and BG has been on a run higher ever since.
BG looks quite cheap on a headline P/E basis, trading at around 17x trailing 12 month earnings, while analysts are projecting about 10-15% average EPS growth over the next few years. However, BG’s results have historically been quite volatile, often beholden to the whims of the global grains and seed markets.
While I don’t have a strong view about BG’s underlying business, what did catch my eye was the low level of options pricing for the stock, though options rarely trade in BG and are quite wide. Here is 30 day implied volatility over the past 2 years:
It’s at a 2 year low, and low on an absolute basis as well, in the low teens. Not quite what you’d expect for a stock at an important technical inflection point.
The Oct 85 call is priced at a bid/offer of $1.15 / $1.45, and the Oct 82.5 puts are priced at $1.00 / $1.25. BG’s big moves in 2014 have come on earnings, but those options prices look quite cheap if BG has a breakout or a breakdown near 5 year highs. I am adding BG to my watch list and might pull the trigger on the trade after a bit more work.