From the second half of 2007 into the middle of 2008 commodities were 'the thing', attracting all the speculative cash as both a weak dollar hedge and a tangible assets play. Agricultural companies rode the wave as they empowered farmers with the means to feed the world.

Bunge(BG) - Get Report is a major player in fertilizers and food products. Estimated 2011 revenues exceed $50 billion. The second half of 2010 saw a surge in EPS that is expected to continue throughout the next few years. Zacks sees BG earning $5.75 this year and $6.49 in 2012.

This is very similar to the pattern in 2007-2008 when earnings per share jumped to $5.95 and $7.73, respectively. Take a quick look at the Value Line chart to see what BG shares did in that environment.

Bunge (BG) EPS

Source: Value Line

View Chart

The stock ran up to peaks of $125 and $135 in those years before getting clobbered by the recession and the total market collapse that followed. Now, with sales and profits ramping up strongly again Bunge's momentum could carry it quite a bit higher than Monday's close of $70.68.

The wind is at Bunge's back in terms of product demand and pricing power.

Substantial non-US revenues continue to make its shares a good anti-$US play. The next three quarterly comparisons should be huge on a year-over-year basis as Bunge replaces weak numbers from 2010.

If I was feeling really bullish about the overall market, I would be playing Bunge aggressively. Instead I'm going to use it more conservatively and look to make a nice return even if the shares simply mark time through early 2012.

If Bunge merely stays above $70 on the January 21, 2012 expiration date:

¿ The call will be exercised and the put will expire

¿ You will have collected $69 in dividends

¿ Your final position will be no shares and $7,069 in cash

That best-case return comes if BG goes up, remains unchanged or even if it dips very slightly.

$7,069 - $5,438 = $1,631 in total return for about a 10.4 month holding period.

$1,631/$5,438 = 30% cash-on-cash. BG would need to rise to almost $92 to achieve that same gain through outright purchase. If someone told you today you could make 30% on your whole portfolio in less than 10.5 months you would probably be interested. Why not consider this for at least part of your overall mix?

Breakeven is $62.19 per share excluding dividends. That's 12% below our trade inception price and would be only 10.8x this year's estimated earnings.

Trades: Buy 100 BG for $70.68 per share, sell to open 1 BG January 2012 70 call at $8.20 and sell to open 1 BG January 2012 70 put at $8.10.

At the time of publication, Paul Price was long BG shares and short BG options.

Dr. Price joined Merrill Lynch in 1987 and over the next 13 years worked with A.G. Edwards, Wheat First and Ferris, Baker Watts. Dr. Price enjoyed enough success to retire in October 2000, but he continues to write and give investment seminars

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