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The cheapest aggie stocks - 7100 views
There is plenty of uncertainty surrounding the direction of the equity markets. Investors continue to contemplate whether to commit more funds into a sinking market or to take profits. I am turning to the PowerShares DB Agriculture ETF (DBA). The ETF tracks an index composed of corn, wheat, soybeans, and sugar futures. DBA is not highly correlated with the equity markets. The correlation coefficient between DBA and the S&P 500 is 0.19. Perfect correlation equals 1.0 and perfect negative correlation equals -1.0. DBA is the next best alternative to fixed income securities.
I have composed a list of three agricultural stocks with forward P/E ratios under 14.
1. Scotts Miracle-Gro (SMG)- recently downgraded by JP Morgan on concerns of rising raw costs. SMG trades at 14X forward earnings and has fallen from $57 on February 20th to $41. The valuation seems compelling for a double digit grower. Management has been buying back stock and recently issued a special dividend. (Beta: 0.73)
2. Archer-Daniels-Midland (ADM)- one of the world's largest agricultural processor of soft commodities. Again, the stock has fallen from $46 last May to $32. ADM now trades at just 12X forward earnings. (Beta:0.80)
3. Deer & Company (DE)- this is a more cyclical play. I am cautious to initiate a position in DE because it has more downside risk compared to SMG and ADM. DE still trades at just 12X forward earnings. (Beta: 1.08).
-Ben
Guest blogging from: Big Ben’s Investing Blog
Note: for more agriculture plays, check out the following portfolios:
Agriculture and Fertilizer Index
Ethanol Stocks
Grain Market Stocks
By:Goldy |
Date: 03/14/07 |
good stocks you sould add mume.pk for your speculative pick it is perdicted to go to 1 DOLLAR!!! |
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Date: 03/11/07 |
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Nope, he doesn't hahaha... |
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Date: 03/11/07 |
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Haven't read it yet (Sharpe), but I assume he discusses mean reversion over the long run (in regards to beta)... |
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Date: 03/11/07 |
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Nice. Thanks for the tips (Sharpe is a pretty smart fellow) |
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Date: 03/10/07 |
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The best way to hedge US uncertainty would be to sell S&P 500 futures contracts, buy SPY puts, or buy the ETF (SDS). |
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Date: 03/09/07 |
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Although the DBA has not historically proven highly correlated with the S&P, because both (looking forward) appeared highly levered to continue domestic and global growth, would this still prove to be the best way to hedge against US uncertainty? In addition, fast flowing money makes the historical beta's given above pretty useless... agree or disagree? |
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