Daily Gains Letter

It’s the Next Big—and Highly Profitable—Thing

By for Daily Gains Letter | Feb 12, 2013

DL_Feb_12_2013_MitchellIf you believe in the commodity price cycle like I do, it’s a good bet that you already own some assets related to the oil and gas industry, and perhaps some gold. The current commodity price cycle started with oil, then moved to gold and other precious metals, and has now entered its final phase in agriculture. The migration is already taking place, and it’s not just a weather-related event. There is real demand out there and real scarcity. Agriculture as an industry sector is about to experience a major resurgence.

To be very candid, probably the best way to profit the most from the commodity price cycle’s migration into agriculture is to own farmland. The price for good farmland is going up all over the world, and it’s going up significantly. Of course, not every investor can just go out and purchase 1,000 acres of really good farmland, so you have to consider agriculture stocks and other related securities to have exposure to the sector.

There are lots of individual stocks related to agriculture and many have already done well due to the migration in the commodity price cycle. One great way to play the sector is by using an agriculture exchange-traded fund (ETF), and one that is a real standout is the Market Vectors Agribusiness ETF (NYSEArca/MOO), which has some $6.0 billion in total assets. The fund’s stock chart is below:


Chart courtesy of www.StockCharts.com

This ETF owns many of the big names in agriculture, like Monsanto Company (NYSE/MON), Deere & Company (NYSE/DE), and Agrium Inc. (NYSE/AGU), to name just a couple. A lot of these stocks have been doing very well lately. This fund is going to move with the commodity price cycle’s rotation to agriculture.

Now, any way you slice it, any kind of investment related to commodities should almost always be considered risky. And the reason for that is the inherent volatility and unpredictability of commodity prices. That being said, I believe that the final leg of the current commodity price cycle is now moving into agriculture, and this trend is supported by supply and demand, scarcity of good land, global warming, and general price inflation. It’s a trend that I believe most equity investors should have some exposure to.

The great thing about agriculture is that when farmers do well, local communities do well. Even large, corporate cash croppers are local businesses, and any profit they make goes right back into the communities they operate in. When a farmer does well, the local community does well.

The commodity price cycle is currently providing a major consolidation in oil prices, as well as gold and silver. These commodities have already done tremendously well in recent years and will likely reaccelerate commensurately with the global economy.

However, if I could pick one new trend that has excellent profits potential going forward, it would be the commodity price cycle’s migration into agriculture. The next profession that’s going to do well financially is farming, and it’s about time.

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