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Yuri
Broj poruka : 236
Points : 1266
Date of Entry : 2015-06-28
Godina : 32

Investing Opportunities 2017

on Mon Dec 26, 2016 12:23 pm
For those who do not want to invest a lot of time in investing research, a good opportunity is the Power Shares DB Agriculture Fund (DBA) which tracks an index of 10 agricultural commodity futures contracts. It has been a terrible ride for the ETF in the last 5 years as it is down 33% since 2011 and at historical lows.


Agricultural commodities ETF since 2007

The ETF is at historical lows, but as demand for food is expected to grow and all the potential influences on prices are currently negative from climate effects to low input costs, the downside seems very limited. Low prices simply do not make farming attractive, so sooner or later the market will return to balance and push prices higher. Any sign of natural or economic shocks would make food prices skyrocket as they did in 2008, 2011 and 2014.

Companies

The Andersons Inc.

The Andersons Inc. (NYSE: ANDE) is a US company that specializes in grain, ethanol, plant nutrient and food rail transportation.


ANDE’s stock price last 12 months

ANDE suffered along the slump in agricultural commodities and fell to prices below $25 in the last few months but quickly recovered as it received a takeover bid at $37 per share. ANDE’s management refused the offer considering $37 is a price below long term value. ANDE has had an average EPS of $2.45 in the last 10 years which means that the CAPE (PE ratio based on 10-year average earnings) was at 10, which is low for a company that almost doubled its revenue in the last 9 years. Also, its price at $25 was below the book value of $26.6.

ANDE is still a good opportunity at current prices as the management rejected the $37 bid as it was too low, so the potential is there. Buying ANDE on any dips should bring good returns as eventually a deal will happen. Let us now check other options that are not yet takeover targets or have similar potential.

Adecoagro S.A.

Adecoagro S.A. (NYSE: AGRO) is a diversified agricultural company that engages in food producing and land transformation in South America.


AGRO’s geographical footprint

The South American company offers a double recovery investment potential as a rebound in the South American political and economic situation would push all stocks higher. As for food, AGRO is well diversified and would also benefit from any rebound in food prices.


AGRO’s sales growth and diversification

AGRO’s stock price has already jumped as 26% of its sales derive from sugar, but in the longer term it should benefit from both a recovery in South America and increased food prices.


AGRO’s stock price

Conclusion

Food is something we live on and historically it has been a cyclical business. We should be close to a bottom of the food price decline cycle, but timing the exact bottom is a fool’s errand. In the long term, food prices should recover and companies like ANDE, AGRO, and food ETFs will provide good diversification and a good opportunity to enter the industry at bottom prices.
source: investiv

back to: Agricultural Riches Stocks To Buy Now
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