The agriculture trade is slowly heating up, and Wall Street is fixing to serve.
Wall Street is particularly good at feeding the marketplace what it wants to consume. Agriculture doesn’t have the appeal like technology, but this is going to change.
Monsanto Company (NYSE/MON) reported outstanding financial results in its first quarter of 2013. But it’s often not front-page news, because agriculture is boring to some—which is such a mistake.
Monsanto’s net sales grew a solid 15% to $5.5 billion. Earnings rose an outstanding 22% to $1.5 billion. Corn seed sales were the strongest, and cash balances and shareholder’s equity rose significantly.
Forgive my enthusiasm, but it’s tough these days to find double-digit good news.
Monsanto is a company that’s not without controversy. It isn’t a Wall Street favorite, but it should be. Agriculture is ripe for more gains.
One very interesting small company that just came to market out of McLean, Virginia is Gladstone Land Corporation (NASDAQ/LAND). This firm buys farmland, and then leases it out to commercial or tenant farmers.
Gladstone, so far, owns approximately 1,630 acres, which isn’t a huge amount. Currently, its agriculture is mostly row-crop fruits and vegetables, but management plans to diversify operations going forward. The company’s new listing performance is outlined in the stock chart below:
Chart courtesy of www.StockCharts.com
Still very small but with a ton of potential, you are going to see Wall Street bring many more of these types of businesses to market. There is a growing appetite for agriculture-related businesses, and the investment theme has staying power.
Wall Street has been selling off equities this earnings season, and that’s absolutely OK. The stock market had a huge run-up in advance, so any pullback on modest to decent earnings is a healthy development.
Bad earnings results are what can wreck this year’s great start. But so far on Wall Street, there haven’t been too many downside surprises.
Archer-Daniels-Midland Company (NYSE/ADM) reports at the end of the month and E. I. du Pont de Nemours and Company (NYSE/DD) reports this morning.
Fertilizer companies are one way to play the agriculture investment theme. But the fertilizer business is volatile in terms of demand and prices. On a business-to-business comparison basis, a company like Monsanto definitely offers more stability on the stock market.
In addition, there are the brand-name equipment manufacturers.
One dealership aggregator out of West Fargo, North Dakota, is Titan Machinery Inc. (NASDAQ/TITN). Titan owns 106 agriculture and construction equipment dealers across North America and 13 in Europe.
I am a big believer in seeds and seed development; there are barriers to entry, your customer base always requires new product every year, and if a farmer is happy, they typically are loyal.
It looks like Wall Street just found itself a whole new industry sector to profit from.