VIEWS: 7 PAGES: 2 CATEGORY: Financial Models POSTED ON: 1/23/2013
One common investment theme that’s been circulating for a while now is the great potential for agriculture stocks.
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.
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