If you think the dollar will decline further then it makes sense to buy commodity stocks and even if there is a global recovery that’s faster than we expect many commoditiy stocks will still outperform because supply is simply unable to meet the increasing demand for some of the commodities. [Let me tell you] which one(s) to buy[- and why]? Words: 1475
So says Chris Rowe (tycoonreport.tycoonresearch.com) in his article* which Lorimer Wilson, editor of www.munKNEE.com, has reformatted into edited […] excerpts below for the sake of clarity and brevity to ensure a fast and easy read. (Please note that this paragraph must be included in any article re-posting to avoid copyright infringement.) Rowe goes on to say:
In a recent interview with Ben Stein, when asked about whether or not gold is a good investment, Warren Buffett said:
He went on to say that he is a buyer of equities [stocks], and that is what he would recommend for others — specifically, investing in [the stocks of] companies that pay dividends and are likely to increase them in the future.
Why Buffett’s View of Stocks is Only Partially Right[That being said] Warren Buffett has an outlook of 10+ years down the road [so] he can be wrong about his call on equities [stocks] for a few years and still not be considered “wrong” as long as equities [stocks] continue higher in the years following a decline. Frankly, I don’t even know if I’ll be around to enjoy my money in 10 years, so I’m looking at what will be moving over the next few years, and possibly over the next year. [As such, I] don’t believe in just blindly investing in “the stock market” (equities), even if they pay dividends so I would take it one step further than that. Buffett says “buy stocks” while I say buy agricultural stocks! [Why? Because] agricultural prices are almost certainly going to be in a bull market over the next several years,. I’ll get back to the agricultural sector momentarily, but first, a history lesson …
Why It is Critically Important to Own Stocks in the Right Sectors
Did you know that the bear market in stocks from 2000 – 2002 actually begin in April 1998? Most stocks were trading lower for the two years leading up to the 2000 top but a hand full of “tech stocks” with enormous market capitalizations (which means large influence on the indices) were ripping higher, thus making it appear that “the market” was moving higher.
My point is [that] those that invested in “the market”, especially if they focused on high dividend stocks, either lost money or didn’t make as much money [as they would have had they invested primarily in tech stocks]. As you can see in the chart below, that compares the performance of the stocks of the S&P 500 to the stocks of the tech heavy Nasdaq, the S&P 500 moved up by about 25% over 2 years, while the Nasdaq went up about 170%.
Look also at the next chart that compares the stocks in the financial sector to the stocks in the energy sector from April 2007 – June 2008. The key is always to be in the right sector, and when a sector is presenting you with a mega-trend that will likely last several years, that’s where you want to be.
Why Agricultural Stocks Will Go Up[A significant increase in the future performance of agricultural stocks] could be caused by food shortages and droughts that will eventually create food shortages but it could also be caused by a decline in the U.S. dollar. [Therefore,] if you think the Fed’s printing of money is going to cause the value of the U.S. dollar to decline further from here, then you can add that to the reasons commodity prices [and their related stocks] are going to continue trading higher.
Commodities have an inverse relationship to the U.S. dollar but due to the huge demand for grains and a lack of supply — not to mention the way the global economy and population is poised to grow — I think even a strong dollar would result in limited downwards pressure on the sector… Although world stockpiles are much higher now than two years ago, we want to buy our long-term positions [in agricultural stocks] before we are faced with an enormously intense situation — before the huge price gains [in their associated commodities] happen.
6 Agricultural Stocks to Consider:
1. AGCO Corporation (NYSE: AGCO) offers a full product line of tractors, combines, hay tools, sprayers, forage, tillage equipment, implements, and related replacement parts. AGCO agricultural products are sold under the core brands of Challenger®, Fendt®, Massey Ferguson® and Valtra®, and are distributed globally through more than 2,800 independent dealers and distributors, in more than 140 countries worldwide.
2. Agrium Inc. (NYSE: AGU; TSX: AGU.TO) is a major retail supplier of agricultural products and services in North and South America, a leading global wholesale producer and marketer of all three major agricultural nutrients and the premier supplier of specialty fertilizers in North America through their Advanced Technologies business unit.
3. Cosan Limited (NYSE: CZZ) is one of the largest alcohol and ethanol producers worldwide.
4. Corn Products International, Inc. (NYSE: CPO) is one of the world’s largest corn refiners and a major supplier of high-quality food ingredients and industrial products derived from the wet milling and processing of corn and other starch-based materials. The Company, headquartered in Westchester, Ill., is a leading worldwide supplier of dextrose and a major regional producer of starch, high fructose corn syrup and glucose.
5. Art’s-Way Manufacturing Co., Inc. (NasdaqCM: ARTW) manufactures and distributes farm machinery niche products including animal feed processing equipment, sugar beet defoliators and harvesters, land maintenance equipment, crop shredding equipment, plows, hay and forage equipment and top and bottom drive augers. After market service parts are also an important part of the Company’s business. They have two wholly owned subsidiaries — Art’s Way Vessels Inc. manufactures pressurized tanks and vessels; Art’s Way Scientific Inc. manufactures modular animal confinement buildings and modular laboratories.
6. Bevo Agro Inc. (TSX: BVO.V) is North America’s leading supplier of propagated agricultural plants, growing and distributing vegetable, flower, berry and other plant seedlings to North America’s growers. Bevo propagates quality seedlings and plants for wholesale vegetable greenhouse growers, field growers and nursery operators from its 34-acre production facility.
An Agricultural ETF to Consider:
Market Vectors Agribusiness ETF (PCX: MOO) seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the DAX global Agribusiness index. The fund normally invests at least 80% of total assets in equity securities of U.S. and foreign companies primarily engaged in the business of agriculture, which derive at least 50% of their total revenues from agribusiness.
An Agricultural ETN to Consider:
PowerShares DB Agriculture (NYSE Arca: DAG) is based on the Deutsche Bank Liquid Commodity Index… composed of futures contracts on some of the most liquid and widely traded agricultural commodities — corn, wheat, soy beans and sugar — [and, as such,] is intended to reflect the performance of the agricultural sector. Investors can buy and sell shares in the Fund at market price on the NYSE Arca, Inc. Ordinary brokerage commissions apply. Shares may only be redeemed directly from the Fund by Authorized Participants in blocks consisting of 200,000 shares.
Today’s [agricultural stocks] will trade higher over the long term with or without you. I think we both agree it’s better if it’s with you… [so] invest in the next bull market and don’t be discouraged by the fact that many of these commodities and stocks have already made substantial gains. Just buy them slowly over the next 6 – 12 months so the peaks and troughs will net you a reasonable average cost basis because: These Days Agriculture Stocks Are the Tech Stocks of the Mid ’90s!