The Long Term Bull in Agriculture II (1/6/08)
Investing Safely in this Bull Market Mega-Trend
Well, fortunately it is much easier to invest in agricultural commodities and agricultural companies than it once was. Here are two ways to do it:
Market Vectors Global Agribusiness ETF (MOO) – If you want to achieve wide global diversification among agriculture-related companies, there is no better way to do it than this ETF, with the appropriately named ticker. MOO tracks the DAXglobal Agribusiness Index and holds positions in 40 companies trading on 13 global exchanges.
These companies run the gamut from equipment makers Komatsu and Deere, to seed and fertilizer companies such as Monsanto and Potash, to firms involved in agricultural chemicals, irrigation, food and livestock operations, ethanol and biodiesel, and food distribution.
Buy on any pullbacks
This ETF began trading in September 2007 and gained 39 percent by the end of December. Considering the long-term fundamentals of the agribusiness sector, this is just the beginning of greater gains ahead. But keep in mind that this ETF is stretched to the upside, so it might be a good idea to accumulate on weakness.
PowerShares DB Agriculture (DBA) – There are few ways to invest directly in agricultural commodities without going into the futures markets. But the PowerShares DB Agriculture ETF is one of the best. This ETF provides equally weighted exposure to the four most widely traded “soft” commodities: corn, soybeans, sugar, and wheat.
DBA gained 34 percent in 2007, and with the supplies of these four commodities under long-term pressure from rapidly rising demand, this upward trend should continue in the years to come.
The Train is Leaving the Station ... Are You on Board?
No matter how strong the fundamentals, bull markets don’t move up in a straight line. This one will be no different. There will be certainly be volatility and corrections along the way. But the fundamentals of the supply and demand equation foretell a long-term uptrend.
Do you expect the price of energy to go down in the long run? Do you believe that governments will stop encouraging biofuels? Do you think that the two billion people in China and India will stop eating anytime soon?
If you answered no to these questions, then it is time to build a long-term position in agribusiness companies and food commodities. This mega-trend is on solid ground and the bull market is just beginning.
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