Tag Archives: agriculture
A Big Yield and Growth in Global Agriculture
By Selena Maranjian August 8, 2013 Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you’d like to add some global agriculture stocks to your portfolio but don’t have the time or expertise to hand-pick a few, the IQ Global Agribusiness Small Cap ETF ( NYSEMKT: CROP ) could save you a lot of trouble. Instead of trying to figure out which companies will perform best , you can use this ETF to invest in lots of them simultaneously. The basics ETFs often sport lower expense ratios than their mutual fund cousins. The IQ ETF’s expense ratio — its annual fee — is 0.75%. The fund is fairly small, too, so if you’re thinking of buying, beware of possibly large spreads between its bid and ask prices. Consider using a limit order if you want to buy in. This ETF is too new for us to be able to infer much from its performance. (It did underperform the world market last year.) It’s the future that counts most, of course, and as with most investments, we can’t expect outstanding performances in every quarter or year. Investors with conviction need to wait for their holdings to deliver . Why global agricultural small caps? It’s a win-win-win proposition: It’s smart to diversify your holdings geographically, so that one region’s downturn doesn’t derail your performance. Agriculture is a solid defensive sector, as the planet’s growing population will always need to eat. And small caps, while they can be more risky than larger companies, also offer more growth potential. (This ETF holds some more established mid caps as well.) More than a handful of global agricultural companies had strong performances over the past year. GNC Holdings ( NYSE: GNC ) surged 36%, offering health and wellness products in the U.S. and abroad from more than 8,000 retail outlets. It’s near a 52-week high and yields 1.1%. The company benefits from more than 2,000 store-within-a-store locations in drugstores and elsewhere, and is expanding beyond that model in China, building stand-alone retail locations. In its recently reported second quarter, revenue rose 9% and EPS nearly 18%. The company faces online competition , but it is finding some success with its Gold Card membership program , which has more than 8 million members. Other companies didn’t do quite as well over the last year, but could see their fortunes change in the coming years. Dole Food ( NYSE: DOLE ) , for example, climbed only 3%. The company has been strengthening its balance sheet (in part by selling Dole Asia), but earnings and free cash flow remain in the red. Its founder has made a buyout offer for the company, but with the company on more solid footing these days, it might not be shareholders’ best option. American Vanguard ( NYSE: AVD ) , specializing in agricultural chemicals, shed 9%. In June, it tempered near-term expectations, citing wet weather in the Midwest and Southeast. Its second quarter did indeed disappoint , with revenue up 2% and earnings per share down 3%. A more promising note is an agreement to co-market its Impact herbicide with Monsanto offerings. Management expects solid demand in the second half of the year. CVR Partners, L.P. ( NYSE: UAN ) slid 16%. A master limited partnership ( MLP ) focused on nitrogen fertilizer, it yields a hefty 10.5%. The company’s recent performance was whacked by a plant shutdown for repairs, but production there has resumed. (The company has just that one plant, so the shutdown was quite a big deal.) Its recent quarter was solid, with record production of urea ammonium nitrate (UAN) and a rosy outlook, as CVR’s UAN facility has been expanded. Bulls like both its growth prospects and its massive yield. The big picture Demand for agriculture isn’t going away anytime soon. A well-chosen ETF can grant you instant diversification across any industry or group of companies — and make investing in and profiting from it that much easier. This isn’t the only ETF that might intrigue you. You can learn more about a few ETFs that have great promise for delivering profits to shareholders by checking out The Motley Fool’s special free report ” 3 ETFs Set to Soar .” Just click here to access it now. The Fool just turned 20; our paying members are getting rich… And we’re in a mood to celebrate. That’s why our top stock pickers (just ranked #1, #2, and #3 over the last 5 years according to an industry watchdog) are about to roll out the next generation of Motley Fool signature stock picks. We’re talking about what could be the next Amazon (1,700% gains)… Priceline (up 3,300%)… or Netflix (up over 1,500%)… In fact, we believe so strongly in all this, we’re plunking down our own company money on a few of these stocks! And we want to invite you along to see it all – FREE, no strings attached. Just enter your email address, and we’ll be in touch. Continue reading
Is Now The Time To Invest In Agriculture?
By Tanzeel Akhtar | Thu, 1st August 2013 According to recent statistics from the Food and Agriculture Organisation, the world production of grain is expected to rise 7% to 2.5 billion tonnes in the 2013 to 2014 crop year. This is expected to increase global end-season stock in 2014 by 11%, to 568 million tonnes – the highest level for 12 years. Will this be enough to satisfy global demand? Taking a long-term view, Tom Tuite Dalton, contributing analyst at Oriel Securities, explains the world is running out of fertile land which is needed to feed a growing population. When investing in agriculture there are number of ways to tap commodities. Those looking to invest in farming and crop production can consider getting direct exposure to individual commodities, agriculture-related stocks or investment funds. Patrick Connolly, certified financial planner at Chase de Vere, says: “Global populations are continuing to grow and as the emerging markets in particular continue to develop and become more affluent, so their populations are demanding an ever-increasing and varied diet.” He warns that agriculture is a notoriously volatile area in which to invest, with high levels of risk, some of which are out of the control of producers and investors, such as poor weather and potential geopolitical problems, with a significant proportion of activity taking place in developing nations. Tuite Dalton says Jupiter European Opportunities , managed by Alex Darwall, has a healthy amount of exposure to food-related businesses such as Syngenta, the fund’s second-largest holding, at over 6% of net asset value. Tuite Dalton suggests: “Those looking to take advantage of the formidable environmental challenges presented by the rising population and continuing mass urbanisation may wish to consider Jupiter Green Investment Trust which has been enjoying a strong run of performance and whose board has recently taken the step of seeking to eliminate the discount [to net asset value} altogether.” The £39.8 million Jupiter Green Investment Trust has returned 41.2% over one year compared with 27.8% for the IT Environmental sector as at 21 July. Dalton suggests that another way to play the agribusiness is through Asia, investing through Vietnam Holding (VNH), whose shares are listed on London’s Alternative Investment Market. The investment company currently has 31% of net assets invested in agribusiness and 42% in domestic consumer stocks. Hung Vuong Corporationis, a seafood firm producing much of the world’s pangasius (Asian catfish), represents 6.9% of Vietnam Holding’s net assets as at 30 June. Other agribusiness companies in Vietnam Holding’s portfolio comprise AnGiang Plant Protecton, Dong Phu Rubber, National Seeds, Dabaco JSC, Southern Seeds and Tay Ninh Rubber. Connoly warns that while there is a strong long-term story for investing in agriculture, this won’t necessarily convert into positive returns for investors. Continue reading
Put Politics Aside, Invest In This South American Agriculture Stock
By GARRETT BALDWIN , Economist, Money Morning July 16, 2013 Three weeks ago we mentioned that Morgan Stanley announced that it will close the agriculture segment of its commodities business. The move was just another sign of hedge funds and banks electing to shift away from soft commodities, and place greater emphasis on the oil and gas markets. Over the last two years, a number of banks have struggled in the agricultural sector. As they continue to show impatience for the long-term, many on Wall Street have picked up the ball and gone home. Still, from our research and conversations with investors like Jim Rogers, the agricultural sector provides one of the best investment opportunities over the long term. With demand outpacing supply and global food stocks hovering near record lows, the fundamentals are clear. It’s is why Rogers told Money Morning this year “the price of agriculture has to go up a lot, or we’re not going to have any food at any price.” But there’s another important investor out there who is long South American agriculture. And he’s using an entirely different strategy than the big banks in New York. The investor is George Soros, Jim Rogers’ former co-founder of the Quantum Fund. Even though many Money Morning readers might not agree with Soros’ politics, there’s one thing you can’t deny: Like Rogers, he too is a legendary investor. And sometimes you have to put politics aside and find the right investment. And sure enough, he’s long one stock that is ripe given the need for more food development in South America. More than One Way to Invest Wall Street banks are pulling out of the agricultural sector for two reasons: One, the short-term focus on profitability clouds their ability to see the long-term value of agricultural holdings. Second, soft commodities are a very difficult to master. There are many different ways to invest in agriculture, but most are subject to short-term volatility given the global supply and demand picture, and the factors impacting prices such as planting cycles, weather variations, energy and shipping costs, and political uncertainty. While animal technology continues to be our favorite way to invest in the sector, the Soros strategy has centered on a valuable investment vehicle that remains popular with hedge funds around the world: farmland. Farmland continues to rise in price as investors attempt to cash in on the growing need for food in a world that will have nine billion mouths to feed in 2050. And it’s a solid hedge against rising prices. Over the past 70 years, farmland real estate appreciation has easily outpaced the annual inflation rate. But farmland isn’t just spiking in price here in the United States. It’s also becoming a very hot commodity down in South America and portions of Africa. And one stock provides an opportunity to get in on the development and ownership of farmland south of the equator. Land Opportunities Abound in South America Adecoagro SA (NYSE:AGRO) is a Luxembourg-based company with approximately 725,000 acres in Brazil, Argentina and Uruguay. Soros Fund Management controls more than a $200 million stake in the company. The company is engaged in the purchase, development, operations and sales of farmland in these three nations. In addition, Adecoagro produces corn, soybeans, wheat, rice, and sugarcane (to provide to Brazil’s booming ethanol sector). The company also engages in the highly competitive meat and dairy sectors. Given that arable land is one of the safest long-term investments out there, AGRO provides a much sought-after way to invest in three of the world’s most important agricultural nations. Investors simply need to be willing to park capital into farmland over the long-term and let the global fundamentals catch up over time. Of course, there are risks to investing in a company like Adecoagro, given its exposure to foreign markets. The stock has been deemed undervalued by multiple analysts given the location of most of its holdings. The principle location of its land is in Argentina, a country rife with economic uncertainty, political turbulence, and rampant inflation. As we’ve discussed several times here at Money Morning, Argentina is one of the worst economies in the world when it comes to economic freedom and property rights. The reality, however, is that Argentina really has nowhere to go but up, as the general business population, and particularly the agricultural sector, has grown tired of progressive politics and unfavorable business environments. But concerns have also centered on the company’s holdings in Brazil, where foreign property ownership is currently a topic of national outrage, and its ethanol development is subject to heavy volatility. Perhaps the biggest threat that few tend to consider is the quality of the farmland in South America. Not all farmland is like rural Indiana. In fact, certain areas of Brazil require as much as six times the amount of water as a Midwestern farm would need in order to grow crops. Adecoagro can counter the latter threat by avoiding land holdings in the lower-quality regions in the southern portion of Brazil where erosion levels are high in the soil and water retention is very low. Currently, Adecoagro uses nearly 70% of its land for agricultural operations, while the balance is currently under development or being held given its long-term appreciation opportunity. For investors looking to get into the global farmland boom, Adecroagro is a stock sitting below $10 that provides plenty of upside, particularly given the confidence shown by hedge funds like Soros Fund Management. Continue reading
