Jim Cramer on How to Profit From the Agriculture Boom
SeekingAlpha's Gary Smith did a write up of Jim Cramer's recent article in the New York magazine about the new Golden Era of the farmers and his several stock recommendations.
"Simply put, while farmers turn to better equipment and technology (as there is no more land available for farm expansion), investors should "own the stocks of the companies that make the equivalent of their derricks and drill bits, their picks and their pans." And as agribusiness has been in the doldrums for quite some time, the pickings are rich.
So, what are his recommendations?
1. Tractor and Big Machinery: Deere & Company (DE), the biggest tractor company in the world.
2. Seed development and innovation: Monsanto (MON), though it is currently far from any bargain price.
3. Another seed innovator: DuPont (DD) as a less risky option, although the conglomerate also includes "some domestic housing and auto businesses that are handicapping the explosion of agricultural earnings."
4. Fertilizer industry: CPotashCorp of Saskatchewan (POT), Agrium (AGU), and his favorite Mosaic (MOS), which, with global operations, can profit from the heavy Chinese demand.
5. Agricultural processor: Archer Daniels Midland (ADM)
6. Soy fuels instead of ethanol: Bunge (BG), the soybean company.
"This recommendation of agricultural stocks is not simply based on worldwide food shortages. As Cramer concludes:
... the etched-in-stone mandates of ethanol use, no matter how absurd they may be, will ensure at least a half-dozen years of extraordinary returns for these stocks. It’s a rush that puts oil and gold to shame. "
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