Portfolio Manager Thomas Eidelman of Eidelman Virant Capital says Federal Agricultural Mortgage Corp. (AGM) is in a dominant position with its niche business, yet is trading at a discount to the market.
“Our latest buy was a company called Agricultural Mortgage, otherwise known as Farmer Mac. Farmer Mac provides a secondary market for qualified agricultural mortgage loans for rural housing, utilities and development loans guaranteed by the U.S. Department of Agriculture,” Eidelman said.
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Eidelman says Farmer Mac is similar to Fannie Mae and Freddie Mac in that it is a government-sponsored entity, except it provides a lower-cost financing to farmers. Eidelman believes the company is trading at a discount because of comparisons to Fannie and Freddie.
“It trades just above book value and eight times earnings, whereas a company with a dominant position like theirs should trade at a significant premium to those multiples that I just listed. I think at $4 a share in EPS and $28 in book value, it should be $45 stock instead of a $30 stock,” Eidelman said.
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