2) Potash Corporation of Saskatchewan, Inc.
3) Syngenta AG
4) Deere & Co
5) Mosaic Co
6) Agrium Inc
7) Archer-Daniels Midland Company
8) Wilmar International Ltd
9) Yara International ASA
10) CF Industries Holdings Inc I asked a friend of this blog with considerable knowledge of the agribusiness sector what he thought of my idea. Here is his answer. “I see a lot of industry heavyweights on the list. I suspect a number of them have enjoyed nice appreciation in the last six months due to the rise in commodity prices and quantitative easing. It's a good question whether those gains will continue. Quite frankly, I am frightened of the stock market. I think we are going to plunge into another recession early in 2013. You asked me what I thought... In terms of hot sectors, this is one. I wonder if you are getting to the party a little late though.” This morning I did my due diligence. My friend was right on target. Looking at the fund’s large positions, research seems to indicate that most of them are rated as a hold or a weak buy. Deere is rated a sell. Most of these companies are pretty near the top of their range. It turns out MOO is not a dividend play as I suspected from looking at a list of their top ten holdings. They only pay out a little over a half a percent. MOO is a growth fund. This is not a bad thing. Typically, this makes the fund more sensitive to market fluctuations than a more conservative dividend play. However, one of the rules of thumb for investors is, “Don’t fight the FED!” Even if quantitative easing proves to be a bad idea with unintended future consequences, all those new dollars created out of thin air have to go somewhere. Lately, they have been juicing returns in the market. How long can that continue? If I knew the answer to that question, I would probably be living somewhere on the South West coast of Maui rather than in the suburbs of our nation’s capital. I look at the agribusiness sector a little differently than most consumables. People have to buy food. Therefore, I suspect that this fund will be less subject to downturns than similar funds in other sectors. It might even continue to grow even if the market declines. How important is entry point to patient long term value investors? In an article entitled, “Does Entry Point Matter to a Dividend Growth Investor?” the author examines a number of particular examples. For the mathematically inclined, this is worth reading.