Big, New Stock Market Trend
One common investment theme that’s been circulating for a
while now is the great potential for agriculture stocks. I
believe in commodity price cycles. We’ve already had a boom
in oil prices, a strong run in precious metals, especially gold,
and more recently, strength in individual agricultural
commodities. If you believe in the potential for price inflation,
hotter weather, population growth, and less arable land, then
fundamentally, the future for agricultural commodities and
agriculture stocks looks pretty good.
Considering agriculture stocks specifically, the stock market
universe is very small, and it’s mostly largecap. I would argue that a balanced stock
market portfolio should have a small amount of exposure to agriculture stocks. A
grainhandler like Bunge Limited (NYSE/BG) is a standout stock, and it’s doing
great on the stock market. But looking at smaller companies and penny stocks, the
number of agriculture stocks to consider is extremely small.
One small, upandcoming company that fits into this category, and that I think is
worth putting on your radar screen, is Ceres, Inc. (NASDAQ/CERE). This early
stage, developing company is based in Thousand Oaks, Canada and is basically an
agriculture biotechnology company selling biomass feedstocks, such as sweet
sorghum hybrids used in ethanol mills in Brazil. Among agriculture stocks, Ceres
has had a tough time on the stock market since it recently listed. The company’s
chart is featured below:
Chart courtesy of www.StockCharts.com
Goldman Sachs underwrote Ceres’ stock market offering, and the company does
have a growing following among investment banks. According to Ceres, for the
quarter ended November 30, 2012, its revenues were about $2.0 million and it
incurred a net loss of $6.9 million, or $0.28 per share. But I think that speculative
investors should now put Ceres on their watch list.
As a group, there’s no commonality to the action in agriculture stocks, but the trend
towards more renewable energy isn’t going away. More and more agriculture stocks
are hitting the stock market, offering ways to help renewable energy companies. It’s
a relatively new trend in capital markets, and it’s worth following.
There has always been an element of bioengineering in agriculture. Now that
agriculture is moving beyond just food and is being used to create energy, business
for agriculture stocks is improving dramatically.
Like I say, most of the global industry related to agriculture is in the hands of large
cap companies that trade on the stock market. I’m going to be looking further into
this sector, especially for developing businesses like Ceres. As always, I favor the
buy low/sell high strategy for stock market investing, so when I come across a stock
like Ceres, which is now below $5.00 a share, the story gets a lot more interesting.