Feed Your Stock Market Appetite With Agriculture
Recession or not a recession? That seems to be the burning question among market analysts nowadays, and it’s causing investors to second-guess themselves when it comes to buying stocks. All of that hesitation just results in missed buying opportunities. If you still can’t get passed the uncertainty, there is a sure thing out there — agriculture.
I realize “sure thing” is a bit idealistic; but if you take a closer look at the variables behind the agriculture boom and why it could be long-term, you just might reap the benefits (the pun potential for this article is bountiful…sorry).
BRIC & M
BRIC is an acronym that stands for Brazil, Russia, India, China. Recently, Mexico has been added to this list of emerging economies…forming BRIMC. Jim O’Neill, global economist at Goldman Sachs, has theorized the idea that the BRIMC economies as a whole could be larger than the G6 in U.S. dollar terms by 2050. Just watch this BRIC video presentation. This ain’t no ostensible theory.
Along with this economic growth comes a larger middle class population and an improved quality of life. And that means higher demand for quality foods.
Stocks Du Jour
So where can you park your money? There are a few ways to take advantage of the boom. One way, of course, is to invest in Agricultural Chemical companies. Two of these that stick out as long-term winners are Monsanto (NYSE:MON) and Mosaic (NYSE:MOS). Both specialize in technology to help farmers produce healthier foods and better animal feed ingredients. These stocks are up 154% and 456% in the last 12 months, respectively (as of market close, 01/14/2008). See Mosaic’s 52-wk chart below.
Mosaic’s second quarter earnings rose nearly 6 times…44% revenue growth.
Farmers need tractors to help foster this anticipated growth. Deere & Co (NYSE:DE) is reaping the rewards of the ag boom. In the company’s fourth quarter 2007 report, Chairman & CEO, Robert W. Lane, advocates that “Deere is well-positioned to continue benefiting from powerful global economic trends such as growing affluence and increasing demand for food, feed and biofuels”. Worldwide sales of John Deere agricultural equipment are expected to increase by about 17 percent for full-year 2008.
Last, but certainly not least are Exchange Traded Funds (ETFs). Perhaps the most popular Ag-related ETF is the Van Eck Agribusiness ETF. Actually, I just like the ticker — MOO. MOO currently represents 37 companies worldwide that are engaged in the agriculture business. To earn a spot on the MOO fund, a company must possess the following characteristics:
- Have a market cap exceeding $150 million
- Have a worldwide daily average trading volume of at least $1 million during the past six months, and over each of the past two months
- Have maintained a monthly trading volume of 250,000 shares over the past six months
- Trade on global exchanges
For those that appreciate the idea of portfolio diversity, MOO will do.
I’m no financial advisor, but this might be a time to throw out the idea of “buy low, sell high” and adopt a “buy now” attitude. This is one boat you don’t want to miss.
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January 17th, 2008 at 8:57 am
My hubby and I think recession in Michigan, at least. So many people are unemployed with factories shutting down. I hope help comes soon to our state.
JJ
January 17th, 2008 at 9:04 am
I’m sorry to hear it, JJ. I guess it’s easy for me to shrug off recession talk being in Texas. We’re generally healthy economically versus the rest of the country…something I admitedly take for granted. Best of luck!
January 20th, 2008 at 3:03 am
This is great! This post is a pure explanation the “domino effect”! If Orville Popcorn had an increase in profits of 20% in one fiscal year, I definitely be looking for the company that’s proving the corn/kernels!
January 20th, 2008 at 3:05 am
JJ Loch you should move down here to Ohio…..We have many major companies that provide services for the entire globe! Proctor & Gamble, General Electric, Cardinal Health, Jergens, Kahn’s, and many more. I think the problem with Michigan is that they had to thrive solely off of GM and now the world has gone to foreign vehicles.
January 27th, 2008 at 7:13 pm
I don’t know about agriculture.
On my blog website, TheNetFool, I give free stock pitches at least once a week. I think that the agriculture sector is posed for a dive. If you consider that retail and financials were the WORST sectors to be in until last week, when they rebounded at last. As such, it seems like all the pillars in the market need to fall, the only sub-industry which really hasn’t been hit is agriculture. They seem inclined to be the next sub-industry to fall, and it could be devastating to a lot of these pitches.
I do agree with your pitches of Mosaic and Deere, because these are well hedged against a decline in ag.