The Andersons, Inc. (ANDE): A Hidden Gem in Ethanol and Agribusiness Post-Russell Relegation

The Andersons, Inc. (NASDAQ: ANDE), a leader in ethanol production and agribusiness, has faced headwinds following its exclusion from the Russell 1000 Index on June 27, 2025. While this reclassification may deter passive investors tracking the Russell benchmarks, the move presents a compelling entry point for active investors. ANDE's robust fundamentals—strong cash flow, consistent dividends, and favorable ethanol export dynamics—position it as an undervalued opportunity in an overlooked sector. Here's why investors should consider ANDE despite its index exile.

The Russell Relegation: A Temporary Liquidity Headwind

ANDE's removal from the Russell 1000, effective June 30, 2025, means it will now trade in the smaller-cap Russell 2000 Index. This shift could reduce its appeal to passive funds, which accounted for $2 trillion in Russell-tracking assets in 2025. Historically, such reclassifications trigger short-term liquidity swings as index funds rebalance. For example, in 2024, Russell reconstitutions drove over $220 billion in trading volume as funds adjusted portfolios.

However, ANDE's fundamentals remain intact. The company's $1.2 billion market cap (as of June 2025) and $400 million in annual free cash flow since 2020 suggest it's undervalued relative to peers. The reclassification may even create a buying opportunity for investors seeking stability in a volatile market.

Why ANDE's Ethanol and Agribusiness Engine Still Runs

1. Ethanol: A Growth Catalyst in a Global Market

ANDE's ethanol segment, which contributed ~30% of 2024 EBITDA, benefits from rising global demand. The U.S. ethanol export market grew to 1.5 billion gallons annually by 2025, driven by Asian and European buyers seeking low-carbon fuel alternatives. ANDE's 12 ethanol plants (with a combined capacity of 1.4 billion gallons/year) and access to Midwest corn supplies give it a cost advantage.

2. Agribusiness: Diversification Beyond Corn

ANDE's agribusiness division—a network of 140 retail locations—offers resilience. The company's precision agriculture services, seed sales, and grain storage operations generated stable margins even during 2023's commodity price swings. Its $1.5 billion in annual agribusiness revenue (2024) reflects a well-diversified revenue stream.

3. Dividends and Balance Sheet Strength

ANDE has maintained a 15-year dividend growth streak, with a current yield of 2.8%—well above the S&P 500's average. Its net debt-to-EBITDA ratio of 0.8x (2024) suggests ample liquidity to weather commodity cycles.

Key Catalysts to Watch

• Ethanol Export Growth: ANDE could benefit from Asia's push to reduce carbon emissions, as Japan and India target 40% ethanol-blended fuel by 2030.
• Corn Prices: A rebound in corn prices (currently trading below $4.50/bu) could boost margins.
• Debt Reduction: ANDE's plan to reduce debt by $100 million by 2026 (via free cash flow) could lift its credit rating.

Risks to Consider

• Commodity Volatility: ANDE's margins are tied to corn prices, which could fall further if global demand softens.
• Regulatory Shifts: U.S. ethanol mandates (e.g., RFS2) could face political headwinds.

Conclusion: ANDE's Time to Shine

The Russell reclassification has created a buying opportunity for investors willing to look beyond index-driven noise. ANDE's $400 million annual free cash flow, dividend resilience, and exposure to ethanol's global growth make it a compelling play in renewables and agribusiness. While liquidity may dip temporarily, the company's fundamentals suggest it's undervalued at 10x forward EBITDA—a discount to peers like Green Plains (GPRE).

Investment Recommendation: Buy ANDE for a 12–18-month horizon. Set a price target of $65–$70 (based on 12x 2025E EBITDA), with a stop-loss below $50.

The Andersons' story isn't about Russell rankings—it's about being a cornerstone in a sector poised for a renaissance. For patient investors, this could be the right time to harvest value from the cornfields.

Data as of June 2025. Past performance is not indicative of future results.