Why Archer-Daniels-Midland Company (ADM) is Among the Best Agriculture Stocks to Buy Right Now
We recently published a list of . In this article, we are going to take a look at where Archer-Daniels-Midland Company (NYSE:ADM) stands against other best agriculture stocks to buy now.
On April 28, CNBC reported that while other US sectors are nearing what President Trump's Treasury secretary Scott Bessent calls 'an unsustainable tariff war', the American farming sector has started to bear the effects of the economic crisis, with the damage already done. American agricultural exporters believe that the global backlash to tariffs imposed by Trump is punishing them, especially through a decrease in Chinese purchasing of US products. This trend is resulting in canceled export orders and layoffs.
Data from the US Department of Agriculture shows that China canceled its biggest pork orders since 2020, stopping the shipment of 12,000 tons of pork. CNBC reported that Peter Friedmann, executive director of the Agriculture Transportation Coalition (AgTC), a leading export trade group for farmers, opined that calling the number of canceled orders of US agricultural products could not be called 'approaching a crisis', as 'it is a full-blown crisis already.'
AgTC also reported that its members are experiencing 'massive' financial losses because of the trade war, based on the reports sent by member companies. A wood pulp and paperboard reported to AgTC the hold or immediate cancellation of 6,400 metric tons in a warehouse. It said that 9,000 metric tons of the product are already on their way to China through water, with the estimated arrival time being May 13. Chinese buyers may refuse to accept these shipments and abandon them at the port, which is why the threat of costly diversion to Chinese or other bonded warehouses looms over the journey.
READ ALSO: and 11 Most Promising Future Stocks According to Hedge Funds.
China-to-US vessel traffic has also seen a steep decline. CNBC reported that according to the Vizion Global Ocean Bookings Tracker, the traffic is down 22.15% week-over-week and 44% year-over-year through April 14. Ben Tracy, Vizion's vice president of strategic business development, said the following about the situation:
'What we've seen in the last two weeks is a continued correction in booking demand for US imports, especially US imports from China. We are now seeing this translate to a drop in departures as well.'
Agricultural exporters opined that no other global markets hold the potential to swiftly replace China's demand and absorb the volume. These trends are already affecting operations and prices. CNBC reported that a lumber exporter told AgTC that some products have already fallen 20% in market value, which will likely impact future investments and inventory planning.
'The U.S. market was stable and improving, but now awash with inventory of former China products,' it said. 'We have diverted employees and production to other (less profitable) production and dramatically slowed down purchasing from independent vendors (loggers, truckers, sawmills).'
We sifted through stock screeners, financial media reports, and ETFs to compile a list of 30 agriculture stocks and chose the top 10 most popular stocks among hedge funds. We sourced the hedge fund sentiment data from Insider Monkey's database. The list is ordered in ascending order of the number of hedge funds as of fiscal Q4 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter's strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points ().
A wheat field at sunset, showing the company's commitment to agricultural commodities.Archer-Daniels-Midland Company (NYSE:ADM) is a human and animal nutrition company that serves as an agricultural processor and supply chain manager. It operates through the Carbohydrate Solutions, Nutrition, and Ag Services and Oilseeds segments.
The company plans to strengthen its financial position in economic fluctuations and improve margins through a strategic plan targeting around $200 to $300 million in cost savings over the coming years. Archer-Daniels-Midland Company (NYSE:ADM) plans to do so primarily through workforce reductions and operational efficiencies, giving it the fifth spot on our list of the best agriculture stocks to buy now.
The company's fiscal Q1 2025 results aligned with its outlook and market expectations, delivering $20.18 billion in revenue. Despite an uncertain environment, Archer-Daniels-Midland Company (NYSE:ADM) advanced various aspects of its self-help agenda, including advancing its pipeline of portfolio simplification opportunities, driving cost savings through targeted operational and organizational realignments, and continuing its disciplined approach to capital allocation.
Overall, ADM ranks 5th on our list of best agriculture stocks to buy according to hedge funds. While we acknowledge the potential for ADM as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. If you are looking for an AI stock that is more promising than ADM but trades at less than 5 times its earnings, check out our report about this cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires.
Disclosure: None. This article is originally published at Insider Monkey.
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Fast Company
25 minutes ago
- Fast Company
32 housing markets where tight inventory still favors sellers
Want more housing market stories from Lance Lambert's ResiClub in your inbox? Subscribe to the ResiClub newsletter. National active housing inventory for sale at the end of May 2025 was up 32% compared to May 2024. That's just 12% below pre-pandemic levels in May 2019. However, while the national housing market has softened and inventory has surpassed 2019 pre-pandemic levels in some pockets of the Sun Belt, many housing markets remain far tighter than the national average. Pulling from ResiClub's monthly inventory tracker, we identified the tightest major housing markets heading into the spring 2025 season, where active inventory is still the furthest below pre-pandemic 2019 levels. These markets are where home sellers have maintained more power compared to most sellers nationwide. Among the nation's 200 largest metro area housing markets, 32 markets (see table below) at the end of May 2025 still had at least 50% less active inventory than in May 2019. That's lower than last month's count, when 37 of the nation's 200 largest metro area housing markets still had active inventory at least 50% below pre-pandemic 2019 levels—and down from 42 of the 200 the month before that. Many of those tight markets are in the Northeast, in particular, in states like New Jersey and Connecticut. Unlike the Sun Belt, many markets in the Northeast and Midwest were less reliant on pandemic-era migration and have fewer new home construction projects in progress. With lower exposure to the negative demand shock caused by the slowdown in pandemic-era migration—and fewer homebuilders in these regions offering affordability adjustments once rates spiked—active inventory in many Northeast and Midwest housing markets has remained relatively tight, maintaining a seller's advantage heading into spring 2025.
New York Times
27 minutes ago
- New York Times
Every NHL team's best value contract in 2024-25
Every dollar matters in a league with a hard salary cap. In today's NHL, players aren't just judged on their ability; they're graded on value and efficiency — how large is their impact relative to their contract? The more players on your team who outperform their contracts, the more high-end contributors you can fit under the cap. If you're paying everybody on your roster market value, chances are you won't have an elite team. Advertisement With the offseason looming, let's analyze every NHL team's best value contracts from this past season. This can help us identify where each club garnered excess value and how that equation could change with expiring contracts and higher-cost extensions kicking in. Here's how we'll conduct this exercise. • We'll be using Dom Luszczyszyn's Net Rating model as an objective measure. Net Rating provides an all-in-one performance metric that weighs factors such as point production, play-driving, defensive impact, penalties drawn, blocked shots, faceoffs, penalty-kill impact and more. That impact is then translated to a market value — what that player's contributions should be worth — and that market value is compared to their actual cap hit. • The model overrates the market value of some depth defensemen who drive strong numbers in sheltered roles. In these situations where I felt there was an obvious, egregious flaw in the model's results for the 'best' value contract this season, I called an audible and picked another player. • Players who changed teams midseason will not be included. • Only skaters with more than 40 games played will be analyzed; no goalies. • Player bonuses will not be factored in. • This is only analyzing the regular season, not playoff performances. Without further ado, let's dive in. Best contract in 2024-25: Jackson LaCombe Jackson LaCombe is a budding star defenseman. The 24-year-old elite-skating defender was by far the Ducks' best blueliner this season, scoring 14 goals and 43 points (despite the Ducks' awful power play), driving star-like numbers on zone exits and zone entries and finishing with a positive five-on-five goal differential despite playing top-pair minutes on a struggling team. He's entering the final season of a two-year bridge deal he signed last year at a steal of a $925,000 cap hit. Advertisement Frank Vatrano cooled off from the shocking 37-goal breakout he had in 2023-24, but he still delivered 21 goals and 45 points this season. It's the third consecutive season he's hit at least 20 goals, which is nice value for under $4 million. Best contract in 2024-25: Morgan Geekie Playing first-line wing opposite David Pastrnak, Morgan Geekie exploded with 33 goals and 57 points for just $2 million. These weren't just empty-calorie goals and points, either; the Bruins controlled nearly 55 percent of scoring chances and had a plus-22 goal differential with Geekie and Pastrnak on the ice together at five-on-five. Those are impressive numbers considering how poorly Boston performed this season. Geekie unquestionably benefitted from riding shotgun with Pastrnak, but this wasn't a one-sided relationship. Pastrnak controlled less than 48 percent of scoring chances and carried a minus-five goal differential during the 450 five-on-five minutes he played this season away from Geekie. Speaking of Pastrnak, he probably didn't get enough recognition for scoring 106 points on such an offensively starved team. It marked his third consecutive 100-point campaign, with his $11.25 million AAV, especially given the salary cap's spike, looking increasingly favorable relative to his superstar production. Best contract in 2024-25: Ryan McLeod The Sabres' three best bang-for-buck contributors are all looking for a big payday. Ryan McLeod, acquired from Edmonton to center the third line in exchange for Matt Savoie, broke out with 20 goals and 53 points on top of his usually reliable defensive play. He should be able to at least double the cap hit on his next contract this summer as an RFA. Alex Tuch scored 36 goals for just a $4.75 million cap hit. He has one year left on his deal, but will be eligible to sign a new extension on July 1. Advertisement Bowen Byram is a gifted skater and puck mover, although his two-way numbers only looked strong when he played with Rasmus Dahlin. Byram provided substantial value for his modest $3.85 million AAV, but the Sabres should probably avoid handing him a big-ticket contract, considering the $19.35 million they already have committed to Dahlin and Owen Power on the left side of their blue line. Tage Thompson and Dahlin are at least cost-controlled long term — they'll continue to provide surplus value for years to come. Best contract in 2024-25: MacKenzie Weegar If goalies were included in this analysis, Dustin Wolf's contract would have easily stood out as one of the best deals in the entire NHL. Wolf was arguably the Flames' MVP and one of the top 10 starting goaltenders in the league this year, all while making just $850,000 on a two-year bridge deal he signed last summer. MacKenzie Weegar was the best bang-for-buck performer among Calgary's non-ELC skaters. He performed like a bona fide No. 1 defenseman despite earning only $6.25 million, scoring 47 points (16th best among all defensemen) and delivering stellar defensive results. Calgary controlled nearly 55 percent of shot attempts and outscored opponents by 17 goals during Weegar's five-on-five shifts. Kevin Bahl emerged as a solid top-four defensive defenseman at just a $1.05 million AAV. Best contract in 2024-25: Shayne Gostisbehere Shayne Gostisbehere quarterbacked the Hurricanes' top power-play unit and scored the 15th-most points-per-game of all NHL defensemen. Combine that with how decisively he won his even-strength matchups further down the lineup, and you get substantial value for just a $3.2 million AAV. Seth Jarvis was the Hurricanes' best forward this season. He scored at a 36-goal pace and drove elite two-way results at a sub-$7.5 million cap hit. Advertisement Eric Robinson chipped in with 14 goals and 32 points at under $1 million. Jordan Staal and Jordan Martinook were dynamite as always on the Hurricanes' suffocating third line at modest prices each. It speaks volumes about the number of surplus-value contracts the Hurricanes have that Jaccob Slavin, arguably the best shutdown defenseman in the NHL, didn't crack the top five despite owning an ultra-team-friendly $6.39 million AAV. Best contract in 2024-25: Ryan Donato Ryan Donato was the only Blackhawk not on an ELC who significantly outperformed his contract. Donato erupted for a team-high 31 goals at a steal of a $2 million rate. His 23 five-on-five goals were tied for the 12th most in the NHL this season with Leon Draisaitl, Brandon Hagel, Jason Robertson and Rickard Rakell. Best contract in 2024-25: Cale Makar Cale Makar scored a career-high 30 goals and 92 points en route to winning his second Norris Trophy. He played at the level of a $14.8 million defenseman, according to Dom's Net Rating model, which is a far cry from his actual $9 million cap hit. Artturi Lehkonen is an excellent complementary top-six winger, contributing 27 goals in just 69 games on top of stellar defensive results. Logan O'Connor had a down year offensively, but his speed play-driving, elite defensive impact and disruptive penalty killing are worth a lot more than the $1.05 million cap hit he carried in 2024-25. Joel Kiviranta (16 goals at league minimum) and Parker Kelly were effective depth forwards at dirt-cheap prices. Jonathan Drouin (37 points in 43 games at $2.5 million) would have made this list, too, if not for his lack of games played this season. Best contract in 2024-25: Kirill Marchenko The Blue Jackets are in an enviable position, as their top four bang-for-buck players all have multiple years remaining on their current contracts. Kirill Marchenko and Sean Monahan were one of the most lethal first-line duos in the NHL. Marchenko scored 74 points at under $4 million, Monahan eclipsed the point-per-game mark for just $5.5 million, and the Blue Jackets controlled a dominant 57 percent of expected goals and a whopping plus-26 goal differential during their five-on-five minutes together. Advertisement Kent Johnson broke out with 24 goals and 57 points in 68 games — he has two years remaining at $1.8 million annually. Zach Werenski's $9.58 million cap hit seemed hefty when he first signed his deal in 2021, but he's outperformed it by playing at a near-Hart Trophy level, scoring 23 goals and 82 points from the blue line. Best contract in 2024-25: Thomas Harley The Stars had an embarrassment of riches in terms of bargain contracts this season. This top five doesn't even include Wyatt Johnston's ELC, Jake Oettinger's $4 million cap hit this season, or Mikko Rantanen. Thomas Harley is a burgeoning star. The 23-year-old scored 16 goals and 50 points, while also driving play like a bona fide No. 1 defenseman, especially when Miro Heiskanen was injured. Matt Duchene led the Stars with 82 points at a bargain $3 million AAV. Jason Robertson scored 35 goals and 80 points for under $8 million. Esa Lindell is one of the best shutdown defensemen in the NHL and enjoyed a standout year for just a $5.8 million AAV. Evgenii Dadonov scored 20 goals and 40 points at a cheap $2.25 million cap hit. Unfortunately, the bill is coming due for the Stars. Johnston, Oettinger and Rantanen all have massive extensions kicking in next season. Duchene is a pending free agent. Harley and Robertson will need significant raises next summer, too. Best contract in 2024-25: Patrick Kane The lack of bargain contracts on this list is an indictment of the Red Wings' pro scouting. Patrick Kane's 59 points in 72 games for $4 million was solid value, and Lucas Raymond led the team with 80 points at an $8.075 million cap hit that will only look better each year. However, the only major surplus value contributors beyond that were Simon Edvinsson and Marco Kasper on their ELCs. Detroit has assembled some promising young players, but it needs a better return on investment from its veterans to return to the playoffs. Best contract in 2024-25: Leon Draisaitl Leon Draisaitl scored 52 goals and 106 points in just 71 games this season. Most impressively, he did all of that and drove elite two-way results despite being saddled with average wingers for large chunks of the year (Vasily Podkolzin was his most common linemate during the regular season). Draisaitl was named a Hart Trophy finalist during the final year of an $8.5 million AAV contract he originally signed in 2017. Advertisement Evan Bouchard has excelled as the Oilers' No. 1 defenseman at a sub-$4 million cap hit. He's in line for a massive raise this summer. His partner, Mattias Ekholm, is a terrific defensive presence at a reasonable $6 million AAV. Zach Hyman had a down year relative to his extraordinarily high standards, but with 27 goals and strong two-way results, he still delivered plenty of surplus value on his $5.5 million cap hit. Connor Brown has been a bottom-six sparkplug with his speed, tenacity, defensive play and secondary scoring for just $1 million. Corey Perry also deserves a shout-out for scoring 10 goals through 21 playoff games at a dirt-cheap $1.15 million rate. Best contract in 2024-25: Sam Reinhart If this exercise included the playoffs, Sam Bennett would be the slam-dunk answer as the Panthers' best contract this season. Bennett had a productive 25-goal regular season, but like years past, he's evolved into a completely different beast in the playoffs. He's arguably been Florida's best player in this Stanley Cup Final run, scoring 15 goals through 22 games, on top of his usual gamesmanship and physical antics. But if we strictly focus on the regular season, Sam Reinhart gets the nod. Nate Schmidt's surplus value is technically higher than Reinhart's — and there's no denying the former has been an excellent third-pair contributor since January onward — but Schmidt is an example of the model overrating a depth player on an elite team. Reinhart scored 39 goals and 81 points, and finished second in Selke Trophy voting, for just a hair over $8.6 million. What makes the Panthers special is that they seem to get an extra million dollars or two worth of performance from nearly every player on their roster. That includes the back end, where Niko Mikkola, Gustav Forsling, Schmidt and Dmitry Kulikov have been bargains, and it also includes forwards who didn't even crack this top-five list, such as Matthew Tkachuk, Aleksander Barkov and Anton Lundell. Advertisement Best contract in 2024-25: Warren Foegele Jordan Spence is a very talented, effective third-pair defenseman, but his Net Rating is slightly inflated by playing sheltered minutes on a strong team. Warren Foegele was a home-run signing for the Kings. He scored 22 five-on-five goals this season, which led the Kings and ranked top 20 among all NHL players. Foegele didn't produce impressively at even strength; he was a play-driving machine — the Kings controlled over 56 percent of shots and nearly 70 percent of goals during his five-on-five shifts. Adrian Kempe is the Kings' best player. The speedy Swedish sniper scored 35 goals and a team-high 73 points on a steal of a $5.5 million cap hit. On defense, Vladislav Gavrikov was the Kings' best defenseman this season. He was a shutdown force, eating huge minutes and difficult matchups, especially when Drew Doughty was out in the first half of the season. Mikey Anderson performed well relative to his $4.1 million cap hit, too, but he spent a lot of time playing with Gavrikov, and I'd argue the latter was the main driver of that pairing's success. Best contract in 2024-25: Kirill Kaprizov It's a shame injuries cost Kirill Kaprizov half the season because his 50-goal, 112-point pace would have made him a Hart Trophy candidate. He performed at the level of a $14.9 million player this year, according to Dom's model, but is paid only $9 million. Joel Eriksson Ek is a perennially undervalued player. He is an elite shutdown center who can also contribute 25-30 goals offensively for a tidy $5.25 million AAV. He, too, missed significant time with injury. Mats Zuccarello is still producing at a bona fide top-six level (54 points in 69 games) at 37, making just a hair over $4.1 million. Matt Boldy is a blossoming star who drives play and scores at a near point-per-game level. His $7 million AAV is going to look like a steal with each year the cap rises. Advertisement Declan Chisholm is a serviceable depth defenseman, but the model overrates his contributions in sheltered usage. Best contract in 2024-25: Nick Suzuki It's understandable why the Canadiens didn't have many bargain contracts on this list. Montreal had some of the most ELC help in the NHL thanks to Lane Hutson's Calder Trophy season and Kaiden Guhle's reliable top-four play, not to mention Emil Heineman and Jayden Struble chipping in as quality depth pieces on their first contracts. This exercise doesn't include goaltenders either, otherwise Sam Montembeault ($3.15 million cap hit) would have been on this list as significantly outperforming his contract. The last management regime also handed out bloated, inefficient contracts to several veterans such as Josh Anderson, Brendan Gallagher and Christian Dvorak. Among non-ELC players, Nick Suzuki and Jake Evans' contracts stood out. Suzuki scored a career-high 89 points — he's officially arrived as premier No. 1 center and is locked up long-term under $8 million annually. Evans thrived as a speedy middle-six center with high-end defensive acumen while also scoring 36 points at a team-friendly $1.7 million AAV. Best contract in 2024-25: Ryan O'Reilly The Predators had a nightmare season, finishing 30th in the NHL standings, with several big-name players failing to live up to their contracts. Ryan O'Reilly was the lone bright spot, scoring 53 points and posting above-average defensive numbers on a modest $4.5 million cap hit. Best contract in 2024-25: Johnathan Kovacevic How many non-ELC defensemen are there in the NHL who can successfully handle top-four minutes on a playoff team for under $1 million? Johnathan Kovacevic unquestionably struggled down the stretch when his usual partner, Jonas Siegenthaler, got hurt, but he provided top-four value for most of the season at a $766,667 cap hit that was literally below the 2024-25 league minimum price. Kovacevic averaged nearly 20 minutes per game on the right side, with the Devils generating more shots, scoring chances and goals than they gave up during his five-on-five shifts. Advertisement The Devils' top-two center punch of Jack Hughes and Nico Hischier is excellent value, too. Hughes was on pace for 92 points before he got hurt, while Hischier scored 35 goals and drove stout defensive results at a tidy $7.25 million cap hit. Siegenthaler enjoyed a crucial bounce-back season. He played excellent, reliable defensive hockey in tough minutes. Stefan Noesen was an effective net-front scorer, especially on the power play, scoring 22 goals at a bargain $2.75 million AAV. Best contract in 2024-25: Simon Holmstrom The Islanders had a trio of younger players who significantly outperformed their contracts, although all of them need new extensions this summer. Simon Holmstrom signed a one-year, $850,000 prove-it deal last summer. He developed into a solid second-line winger this season, scoring 20 goals and 45 points while also providing reliable defense and penalty killing. Noah Dobson had a down year relative to 2023-24 when he played like a star No. 1 defenseman. Dobson's offense slipped to 39 points in 71 games, and his defensive play was shakier than his sterling numbers would indicate. With that said, he still provided surplus value as an effective top-pair contributor for only a $4 million cap hit. Alexander Romanov has become a rock-solid top-four presence for the Islanders. He can defend, hit and move the puck effectively. Best contract in 2024-25: Adam Fox Nearly everything went wrong for the Rangers this season. Outside of Will Cuylle's ELC production, New York didn't have a single player who truly outperformed his contract by a significant margin. Yes, Adam Fox was again by far the team's best defenseman, but he wasn't quite as elite this season as his analytics would suggest. He lived up to his $9.5 million cap hit, but you'd have to squint and stretch to say he provided a ton of value beyond that. Advertisement Alexis Lafrenière outproduced the $2.325 million AAV from his last bridge deal, but it's hard to celebrate that when his production fell by 11 goals this year. He needs to score a lot more than 17 goals and 45 points to live up to his $7.45 million AAV extension, which kicks in next season. Best contract in 2024-25: Adam Gaudette Adam Gaudette found success after being reunited with Travis Green, his first NHL head coach. He scored 19 goals at the league minimum of $775,000, all while averaging fourth-line minutes. Gaudette was streaky during the regular season, but he stepped up in the playoffs with three points in six games. Shane Pinto scored 21 goals in 70 games and was an above-average two-way driver at center for just a $3.75 million AAV. Drake Batherson had a disappointing playoff, but he was second on the team with 68 points in the regular season despite making under $5 million. Artem Zub is an excellent shutdown defenseman and would be worth considerably more than his $4.6 million cap hit if he could just stay healthy. Best contract in 2024-25: Cam York Cam York isn't a flashy player or a prolific point producer, but he defends well, moves the puck effectively and handles challenging top-four matchups relatively well. He accomplished all of that while in the final year of a bridge deal that paid him just $1.6 million. Bobby Brink broke out with 41 points in 79 games this season. Thirty-five of those points were at five-on-five, which ranked third-best among Flyers players behind only Travis Konecny and Matvei Michkov. The diminutive 23-year-old winger is a solid middle-six talent and has one year left at a bargain $1.5 million AAV. Nick Seeler is underrated outside of Philly. The hard-nosed veteran defender is a heart-and-soul player who drives quality defensive results and consistently wins his even-strength minutes. Advertisement Noah Cates isn't a flashy player, but he's a stout defensive matchup center who also contributed 16 goals and 37 points. Best contract in 2024-25: Rickard Rakell It's incredible how quickly the perception of a player's contract can flip. Last summer, Rakell's $5 million cap hit seemed a bit steep after a down year, during which he slumped to just 15 goals and 37 points in 70 games. Now, that same $5 million AAV looks like a bargain after exploding for 35 goals and 70 points. The dilemma now is whether they should sell high on Rakell this offseason, considering his shooting percentage was well above his career norms and could regress next season. Sidney Crosby, at 37, remarkably finished 10th in league scoring with 91 points. Pittsburgh will face a similar dilemma with Bryan Rust as they do with Rakell. Rust, 33, scored a career-high 31 goals and 65 points in 71 games. He has no trade protection as of July 1 — would the Penguins consider shipping him for a lucrative haul? Matt Grzelcyk was closer to fair value than significantly outperforming his contract. He hit 40 points and was terrific on the power play, but his even-strength performance, especially defensively, was shaky. Best contract in 2024-25: N/A Jake Walman (excellent top-pairing results for just $3.4 million AAV), Mikael Granlund (45 points in 52 games for San Jose at $5 million) and Fabian Zetterlund (17 goals in 64 games at $1.45 million) provided excellent bang for the buck, but they were each sold for strong returns at the deadline, so they didn't qualify for this list. Macklin Celebrini, William Eklund and Will Smith were key drivers for the Sharks' top six on their ELCs. Best contract in 2024-25: Jared McCann The Kraken aren't receiving many efficient contributions from their non-ELC players. Jared McCann is the clear exception, as he led Seattle with 61 points despite only having the ninth-highest AAV on the team. Kaapo Kakko was also a slick midseason acquisition — he found chemistry with Matty Beniers and scored 30 points in 49 games while on a $2.4 million cap hit. Advertisement Best contract in 2024-25: Dylan Holloway Dylan Holloway wasn't just the top contract on the Blues; he was one of the best bang-for-buck performers in the entire NHL. He took off in late November with Jim Montgomery's arrival, scoring 22 goals and 55 points in his last 55 games. He was a terrific play driver due to his pace, energy, forechecking and improved playmaking as well. Holloway is a growing star with another year left at a steal of a $2.29 million cap hit. Philip Broberg, acquired from Edmonton in a corresponding offer sheet, enjoyed a massive breakout season, too. He was a two-way, top-four beast, with the Blues controlling 52 percent of expected goals and outscoring teams by 20 goals during his five-on-five shifts. Robert Thomas is one of the most underrated first-line centers in the NHL, locked up for another six years at a $8.125 million cap hit that is aging beautifully. Thomas ranked third among all players with 45 points in his final 30 games. Colton Parayko is an elite shutdown defenseman but also had an offensive renaissance this season, scoring 16 goals and 36 points in 64 games. Cam Fowler, his partner after a midseason trade, was terrific value for his $4 million AAV, too. Best contract in 2024-25: Brandon Hagel Everybody knows Brandon Hagel is a high-end player, but I don't think enough people are recognizing the superstar level that he played at this season. Hagel was tied for 11th in NHL scoring with 90 points and played Selke-caliber defense on top of that. In a tough matchups role, Hagel drove a dominant 57 percent of scoring chances and a plus-22 goal differential at five-on-five. He was also one of the best penalty killers in the league. He accomplished all of that while making only $6.5 million against the cap. His center, Anthony Cirelli, found a new offensive gear this season, too, scoring 27 goals and 59 points. Advertisement Nikita Kucherov and Victor Hedman are still bona fide stars at team-friendly rates. Best contract in 2024-25: Jake McCabe Jake McCabe and Chris Tanev were lights out together as the Leafs' de facto top pair. They absorbed very difficult matchups against top lines and tons of defensive zone starts, but still decisively won their minutes. The Leafs generated more scoring chances than they surrendered and outscored opponents by 12 goals during the McCabe/Tanev pair's five-on-five shifts, thanks to an incredible 1.83 goals-against-per-60 rate. Both defensemen were excellent value for their contracts, but McCabe's tiny $2 million cap hit (which was reduced because the Blackhawks retained half of his cap hit when traded) netted a bit more surplus value. Bobby McMann's 20 goals were a nice bonus for the Leafs at $1.35 million, although his scoring completely dried up in the playoffs. Pontus Holmberg and Steven Lorentz were useful, defensively oriented depth contributors at dirt-cheap prices. Best contract in 2024-25: Michael Kesselring Utah's right-side defense was hammered in the first half by injuries to Sean Durzi and John Marino. That forced sophomore defenseman Michael Kesselring into an elevated top-four role. Kesselring excelled, with the Mammoth controlling 54 percent of scoring chances and 56 percent of goals during his five-on-five shifts this season. He struggled at times in the second half defensively, but he displayed clear top-four potential for most of the year, which is highly valuable at a $1.4 million cap hit. Barrett Hayton scored a career-high 20 goals and 46 points, in addition to boasting very good defensive metrics, at a bargain $2.65 million AAV. Clayton Keller exploded for 90 points but isn't paid like a bona fide superstar. Advertisement Best contract in 2024-25: Quinn Hughes Quinn Hughes was a one-man show, carrying a weak supporting cast all season. Hughes led the Canucks in scoring by a whopping 26 points as a defenseman, despite missing 14 games because of injuries. Hughes is a bona fide superstar making less than $8 million against the cap for two more seasons. Pius Suter scored 25 goals and 46 points as a key middle-six center. He also defended at an above-average level and was a first-unit fixture on Vancouver's elite penalty kill. He provided that all-around value for just a $1.6 million AAV — he may triple that cap hit in free agency this summer. Kiefer Sherwood broke out with 19 goals and 40 points. Nearly all of that production was at even strength, with Sherwood leading all Vancouver forwards in five-on-five points. He was also a wrecking ball on the forecheck, breaking the NHL's record for most hits in a single season. He was worth more than double the $1.5 million cap hit he carried this season. In the final year of his $1.1 million contract, Nils Höglander still managed to deliver surplus value despite an up-and-down campaign. Höglander had a nightmare first half but was one of Vancouver's best wingers from January onward, especially from a play-driving perspective. Tyler Myers has his flaws, but he was mostly solid again in a second-pair role, outperforming the modest $3 million cap hit he's on. Best contract in 2024-25: Brayden McNabb Brayden McNabb was one of the league's best shutdown defensemen in the regular season at only a $2.85 million cap hit. McNabb impressively suppressed opponents' ability to generate shots and scoring chances despite playing difficult matchup minutes, with the Golden Knights surrendering just 1.79 goals against per 60 during his five-on-five shifts. Advertisement Victor Olofsson injected crucial secondary scoring (15 goals in 56 games) at a dirt-cheap $1.075 million rate. Shea Theodore is a star — he scored a career-high 57 points in 67 games in the final year of a sweetheart contract that cost $5.2 million against the cap. Ivan Barbashev is streaky and didn't produce enough in the playoffs, but he scored a 27-goal, 60-point pace in the regular season. He was a mostly effective top-line winger for Jack Eichel, making a reasonable $5 million. Brett Howden broke out with 23 goals for $1.9 million. Best contract in 2024-25: Aliaksei Protas Aliaksei Protas and Connor McMichael's breakouts helped revitalize the Capitals' top-six forward group. Protas went from not even cracking 10 goals in 2023-24 to scoring 30 in 76 games this season. He also significantly boosted the Caps' ability to control two-way play. With another four years left at a $3.375 million cap hit, Protas is on one of the best contracts in the NHL. McMichael, meanwhile, was a game-breaking offensive driver with his speed and skill. He piled up 26 goals and 57 points despite not even playing on the Caps' top power-play unit, at a steal of a $2.1 million AAV. Tom Wilson turned back the clock, scoring 33 goals and 65 points while also driving strong defensive results in a tough matchups role. Nic Dowd is one of the most underrated bottom-six centers in the NHL. He's elite defensively and on the penalty kill and chipped in with 14 goals. Jakob Chychrun also narrowly missed the cut for this list. He was a home-run acquisition, scoring 20 goals from the blue line at a bargain $4.6 million cap hit. Best contract in 2024-25: Dylan Samberg The Jets had a near-endless supply of surplus value contracts. Dylan Samberg led the way; he broke out as a top-four star on Winnipeg's blue line. He drove elite defensive results, crushed it on the penalty kill and displayed enough puck-moving and secondary offensive skill to profile like a legitimate No. 2 defenseman on a contending team. Samberg accomplished all of that for just $1.4 million against the cap. Advertisement Josh Morrissey finished fourth in Norris Trophy voting. He still has three years left at a bargain $6.25 million AAV. Up front, Kyle Connor, Gabriel Vilardi and Nikolaj Ehlers represented a trio of terrific contracts in Winnipeg's top six. Connor, in particular, stood out by scoring 97 points at a hair over $7.1 million. (Top photo of Aliaksei Protas and Jordan Martinook: Patrick Smith / Getty Images)
Forbes
27 minutes ago
- Forbes
Concentrated Stock Positions: Compounding Versus Risk
Warren Buffett and Charlie Munger used concentrated stock positions to compound wealth. The methods ... More behind the strategy are examined along with data on the risks. (Photo credit should read JOHANNES EISELE/AFP via Getty Images) Charlie's portfolio was concentrated in very few securities and therefore his record was much more volatile but it was based on the same discount-from-value approach. He was willing to accept greater peaks and valleys of performance, and he happens to be a fellow whose whole psyche goes toward concentration, with the results shown. – Warren Buffett discussing Charlie Munger's investment process in Damn Right! by Janet Lowe Berkshire Hathaway's (BRK/A, BRK/B) Warren Buffett and his late partner Charlie Munger are considered the greatest investment duo of all time. Munger's investment strategy tended to be very concentrated, with the Daily Journal Corporation (DJCO) portfolio that he controlled typically having only four or five central holdings. Even Berkshire's $259 billion publicly traded stock portfolio consists of only 36 stocks, with 71% of the portfolio value in the top five holdings. A study by Antti Petajisto examined the long-term performance of concentrated stock positions, noting that these positions tend to underperform and add risk to portfolios. This article will discuss the evidence and its implications for taxes, taking into account this information. In addition, some solutions will be reviewed. Some stock market math is needed to help put the underperformance data in its proper context. According to a paper by Hendrik Bessembinder recently examining the returns on 29,078 US stocks from 1926 through 2023, over half of all stocks, 51.6% to be precise, had negative cumulative returns. How can there be all these losing stocks when the S&P 500 has an annualized return of 9.8% from 1928 to 2023? The complex answer is that stock returns have strong positive skewness. However, a simple example of long-term positive compound returns provides a more easily digestible answer. Take a portfolio of just two stocks selling for $100 per share. The first stock grows at a 9.8% annualized rate, while the second stock declines at a 9.8% annualized rate over thirty years. One would think that our total portfolio would stagnate during that period, as the losses in one stock would offset the gains in the other, but compound returns make our intuition incorrect. The exponential return on our positively performing company outweighs that of the loser. This portfolio grew to be worth $1,657, representing a 7.3% annualized rate of return. In other words, the highest-performing stocks in the S&P 500 more than compensate for the losers over time. The Magic Of Compounding When examining concentrated, non-diversified portfolios, the median return should be the primary focus in assessing the risk of potential outcomes. The ten-year median return on an individual US stock was -7.9% or -0.82% per year relative to the overall market. Interestingly, for stocks that were in the top 20% of performers in the previous five years, the ten-year median relative return was a dismal -17.8% or -1.94% per year. The mean return in both cases is positive because the smaller subset of fabulously performing stocks dominates the return across a diversified portfolio. 10-Year Single Stock Return: 1926-2022 Risk to us is 1) the risk of permanent loss of capital, or 2) the risk of inadequate return. – Charlie Munger Petajisto found that the return volatility of portfolios with a single holding of up to 10% was little different from a diversified portfolio. He noted that volatility increases begin to become meaningful at individual holding weights of 10-20%. Once a single holding reaches 30% or more, diversification is of little help in controlling volatility. While academics and some practitioners define stock risk as volatility, it is only one measure of risk among others. Volatility measures how much the price of a stock fluctuates over time, which is only meaningful if one needs to sell or becomes uncomfortable with that price movement. Volatility is typically used as a measure of risk precisely because it is easily measurable. Munger was comfortable with the added volatility of holding a small number of stocks because he didn't believe volatility was meaningful for the long-term investor. His focus was on permanent loss of capital and a reasonable return on his investment. Sit on your ass investing. You're paying less to brokers, you're listening to less nonsense, and if it works, the tax system gives you an extra one, two, or three percentage points per annum. – Charlie Munger While the case for some concentration in holdings can be made for highly skilled investors with a high tolerance for volatility, taxes have a significant impact on the added reason for retaining these outsized holdings. Unrealized capital gains on stocks are akin to an interest-free loan from the government, so the longer an investor can utilize the Internal Revenue Service's share of the gain to compound wealth, the better. Since the point of this exercise is to look at holdings that grew into concentrated holdings, the calculation around short-term capital gains isn't relevant. However, the higher tax rate on short-term gains makes avoidance generally the best policy if possible. Many assumptions must be made to illustrate the additional return required to offset the tax payment for taking a taxable long-term capital gain on a stock; however, the following examples will provide a reasonable model for decision-making. In this example, the stock is now worth $100,000 and has a tax basis of $65,000, and the investor's long-term capital gains rate is 28.8%. Depending on how long you hold the new investment you buy with what remains of the sale proceeds after paying the tax, the latest investment needs to outperform your previous by 3.6% annualized for three years or 1.1% for ten years to make up for the tax payment. Breakeven Excess Annualized Return With the same assumptions as before, but the stock is now worth $100,000 and has a tax basis of $20,000, the new investment purchase must outperform your previous by 9.1% annualized for three years or 2.7% for ten years to make up for the tax payment. Massive winners lead to a larger tax hurdle for sale despite possible forward-looking underperformance. Low-Basis Stock: Breakeven Excess Annual Return While the variables make a difference, and there are cases where it would be appropriate, short-term capital gains should generally be avoided if the goal is to maximize after-tax wealth. Even long-term gains retain a significant hurdle for deciding to exit a winning investment in a taxable account. The conclusion is that investors owning companies that are expected to be excellent long-term should be willing to tolerate short-term underperformance to utilize the power of compound returns and maximize after-tax wealth. We expect to hold these securities for a long time. In fact, when we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever. We are just the opposite of those who hurry to sell and book profits when companies perform well but who tenaciously hang on to businesses that disappoint. – Warren Buffett Even Warren Buffett's tolerance for concentrated positions has its limits, as demonstrated by Berkshire Hathaway's history of owning Apple (AAPL). Berkshire Hathaway began amassing a position in the first quarter of 2016. By the third quarter of 2023, Apple had grown to account for 52% of Berkshire's publicly traded stock portfolio, with a value of nearly $157 billion. During this period, Apple achieved a total return of 613.8%, or 28.9% annualized, compared to the S&P 500's total return of 141.72%, or 12.1% annualized. Apple (AAPL) Stock Price Berkshire began to trim its position in the fourth quarter of 2023 and sold a sizable stake over four straight quarters. As of the end of the first quarter of 2025, Apple remains Berkshire's largest publicly traded stock holding at 26% of the portfolio, with the stake worth about $67 billion. Percent Of Berkshire's $259 billion 13F Portfolio: 1Q 2025 At the 2024 annual meeting, one of the most significant disclosures was that Berkshire Hathaway sold nearly $20 billion of its massive stake in Apple (AAPL) during the first quarter of the year. Despite selling about 13% of its stake that quarter, Buffett said it's likely that Apple will remain the largest common stock holding at the end of the year. Buffett noted that Berkshire's holdings in American Express (AXP) and Coca-Cola (KO) were 'wonderful' businesses but said that Apple is an even better one. Apple sold for as low as 10 times earnings in 2016, but by the fourth quarter of 2023, when Berkshire began to sell in earnest, the valuation had blossomed to 30 times earnings. Buffett has never given a definitive answer regarding the trimming of Apple. Still, one can surmise that risk management, combined with the higher valuation, making the pace of past gains unlikely to be replicated, likely led to the sales despite the enormous tax bill. The ingredients of Warren's and Charlie's great investment performance are simple: (a) a lot of investments in which they did decently, (b) a relatively small number of big winners that they invested in heavily and held for decades, and (c) relatively few big losers. – Howard Marks Buffett and Munger certainly utilized the power of compound returns by allowing winners to run and selling the losers over a long period, assisting in maximizing after-tax wealth. This strategy wasn't always set in stone, as the Apple investment shows. Investors need to be mindful of the additional risk that comes with successful concentrated positions, weighing it against the tax costs, and consider the fundamental valuation of the business. The data show that extreme upside winners tend to face some headwinds, so the probabilities need to be considered when examining possible future outcomes. Harvesting capital losses to offset realized gains from trimming concentrated positions is an effective tool used by Warren Buffett and intelligent wealth managers. Beyond the scope of this article, there are more innovative strategies available to qualified high-net-worth investors that can be potent ways to diversify concentrated stock positions in a tax-efficient manner.
