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Another way to invest in the Agriculture boom

Posted By Dick Sterling
December 18, 2013




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One of the challenges for investors is the limited supply of publicly-traded companies in the agricultural sector. There just aren't enough. Twenty+ years of weakness (since the early eighties until about 10 years ago) in the ag markets left relatively few players, all of whom you've heard of. Plus, economies of scale (together with state interference) led to consolidation so that a few massive agribusinesses dominate grains, fertilizers, dairy, poultry, beef... etc. The big companies are already fully valued.

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Still, there are plenty of alternatives, but they require hunting. One niche is the smaller seed suppliers, representing an investment alternative to the massive dominant firms --- Syngenta, Dupont, Bayer and Monsanto. Two companies to look at:

Ceres (CERE) --- they develop seeds for the biofuel market. The focus is heavily on IP, and I don't like the company except as a speculation on being acquired. The stock has cratered . At about $1.50 and a market cap of $40 million it's interesting and offers massive upside. Risk is 100%.

S&W Seed (SANW) --- its main focus is alfalfa. It's a niche player. The stock has tanked in the past 12 months. It trades at about $6 and the market cap is $70 million. Revenues are expected to be over $50 million for fiscal 2014. It's a real business. It has a pipeline of opportunities and although it's a relatively small company, they have realistic prospects and substantial upside. Not a short term punt though.

Right now is a time to focus on small stocks, such as the two mentioned above --- why? Although the market has skyrocketed during the past year, the focus has been on large stocks while the smaller companies have been mostly disregarded. It's not their time yet, but if the bull market continues, it will be soon enough. The trick is to position in them now.

Remember --- as an individual investor, you have a competitive advantage in small stocks, because (to repeat the points I've made in previous posts):

One, institutions have great difficulty trading small stocks because of their size.

Two, institutions often adhere to rules which prevent them from buying small stocks.

Three, small stocks are not heavily researched, meaning it’s harder for fund managers to assess and follow them.

Four, small stocks usually lack liquidity, keeping larger players on the sidelines.

Five, small stocks are unorthodox --- and so the trend-following fund managers are scared of them.

But how do you select the right ones? I’ve designed a tool to help you. It's a fully-automated, quick, easy-to-understand system for separating the outstanding small stocks from the duds. Buy The Small Stock Formula. The ease, speed, and results are exceptional. I believe you'll agree --- it's one of the most valuable tools an investor can own.Posted by: Dick Sterling, Editor   contact here

 

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