The Best Way To Play The Agriculture Revolution With ETFs

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April 19, 2013 2:34pm NYSE:CROP NYSE:MOO

ETFsRudy Martin: Yesterday’s most-fashionable sector resides in today’s dog house. But you can take some comfort that one of mankind’s oldest commercial activities is churning out plenty of present-day profit opportunities.


Right now, it’s a troubling time for the tech sector, especially as some of its hottest names are cooling off amid lackluster earnings and less-than-gangbusters demand for the new Windows 8 platform.

And tech darling Apple (AAPL), which has done wonders for the move away from PCs and to more mobile devices, has borne the brunt of the tech selling.

Apple dipped below $400 a share this week amid iPhone chipmaker Cirrus Logic’s (CRUS) disappointing outlook and buzz about a cheaper iPhone 6. (Even though the iPhone 5S still hasn’t come out!)

Beyond our quest for the newest gadgets and the fastest connectivity methods that fuel our tech addictions and cravings for their high-profit-potential stocks, there lies an industry as old as time that can offer a steady stream of timely returns, for perhaps generations to come.

Here’s how you can make potentially big bucks from a sector that might seem a bit old-fashioned, but the profits it continues to produce never seem to go out of style!

Here’s Something to Chew On

Some of the earliest endeavors of civilized humanity — growing things to eat and wear — fit nicely into one of the most-powerful global investing themes for 2013, the commodity super-cycle.

In other words, people all over the world are gobbling up an exploding amount of natural resources. Not just grains like soybeans and corn, or just the “soft” commodities like coffee and sugar, but also chicken, beef, pork and other related foodstuffs.

Last week I gave you eight stocks that can help you “bring home the bacon” while the citizens of the world make more money and spend an increasing chunk of it on eating better.

It’s a pretty safe assumption to make that food demand will always be on the rise. This makes the stocks we discussed very attractive, both as a way to diversify your trading account and to do so with names that serve a broad and growing global audience.

However, I know that many of you prefer to trade ETFs, and there are plenty of food-related funds that can give you exposure to juicy returns in this sector without having to bet the farm on a bunch of food stocks.

6 ETFs for the Agriculture Revolution

(Click here to view full-size image)

Source: Morningstar

This table lists six stock ETFs (identified by distinctly descriptive ticker symbols as ag-industry portfolios), with portfolio holdings for the most part tangentially related to actual farming — e.g., ag chemicals, seeds, farm machinery and food processors.

If you prefer investments more correlated with the output of agriculture — in other words, those that invest directly in commodity securities such as forward contracts — take a look at the chart below.

Even More ETFs for the Ag Revolution

(Click here to view full-size image)

Source: Morningstar

One thing you’ve got to admire about some of these funds — with tickers like COW (livestock) and NIB (cocoa) and JO (coffee), and you can easily tell which ag products they cover!

Which is the Better Way to Invest In the Agriculture Revolution?

There are a few key differences between buying ETFs that invest in stocks, and ETFs that hold commodity contracts. But the most important question here is, which can provide a better return?

A quick comparison of these two charts indicates an inherent advantage of corporate stocks over commodities.

While most of the commodity-price-based Exchange-Traded Products lost ground over the past 12 months and for the year to date, the stock ETFs in the first table have generally produced positive results.

Of course, past results don’t always indicate future performance. But the nice thing about investing in food is that the chance of people giving it up and choosing starvation instead is, well, slim.

So, outside of the unlikely event that human beings give up on food, the trend of higher demand — and, along with it, higher prices for foodstuffs, stocks and ETFs — is higher.

Happy Trading!

Rudy MartinWritten By Rudy Martin From Uncommon Wisdom Daily

Uncommon Wisdom (UWD) is published by Weiss Research, Inc. and written by Sean Brodrick, Larry Edelson, and Tony Sagami. To avoid conflicts of interest, Weiss Research and its staff do not hold positions in companies recommended in UWD, nor do we accept any compensation for such recommendations. The comments, graphs, forecasts, and indices published in UWD are based upon data whose accuracy is deemed reliable but not guaranteed. Performance returns cited are derived from our best estimates but must be considered hypothetical in as much as we do not track the actual prices investors pay or receive. Regular contributors and staff include Andrea Baumwald, John Burke, Marci Campbell, Selene Ceballo, Amber Dakar, Roberto McGrath, Maryellen Murphy, Jennifer Newman-Amos, Adam Shafer, Marty Sleva, Julie Trudeau, Jill Umiker, Leslie Underwood and Michelle Zausnig.

This investment news is brought to you by Uncommon WisdomUncommon Wisdom is a free daily investment newsletter from Weiss Research analysts offering the latest investing news and financial insights for the stock market, precious metals, natural resources, Asian and South American markets. From time to time, the authors of Uncommon Wisdom also cover other topics they feel can contribute to making you healthy, wealthy and wise. To view archives or subscribe, visit http://www.uncommonwisdomdaily.com/.


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