American Vanguard Corp. (AVD) is expected to see increased demand for its core insecticide and herbicide products as conventional pest-control measures are making a come-back to farms, says Chris Kapsch, Analyst at Topeka Capital Markets. Moreover, he says, the agricultural chemicals company can expect some upside as corn prices re-rally closer to harvest time.
“American Vanguard is a special situation story that’s a beneficiary of the resurgent demand in conventional crop-protection chemistries, where there’s good momentum for demand in its core insecticide and herbicide products, which should be sustained for the next several years so for value or GARP investors, I think it’s a compelling situation,” Kapsch said.
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Kapsch has a “buy” rating on this small-cap chemicals company. He says companies with exposure to agriculture tend to have their fortunes tied to the price of corn, and although this year the crops were planted late and saw several problems, he expects better pricing later in the year.
“With acreage and yield forecasts that are likely to be revised lower, we think there’s a chance corn prices could re-rally closer to harvest time, so any negative investor sentiment being created by the recent pullback in corn could actually provide an opportunity for ag-related equities that have been underperforming,” Kapsch said.
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