Buy DuPont To Profit From Rising Agricultural Commodity Prices
The Dynamic Wealth Report
March 7, 2008
A Secret Way To Profit From The Agricultural Boom
Have you been watching the markets over the last few weeks? If you
have you know how poorly the stock market has been performing (we’re now
testing the 12,000 level). You also know that one part of the
market is doing extremely well – commodities. The commodities
markets are doing so well that most are trading at multi-year highs.
Can you believe it?
When most people think of commodities, they think of precious metals
like platinum, gold, and silver. But there are also agricultural
commodities. These Ag commodities include wheat, soybeans, corn and a
myriad of other products.
Agricultural products, like precious metals, have been reaching new
highs over the last few months. Wheat just a few weeks ago went
limit-up on the market. If you don’t know, limit-up is a term
specific to commodities. It’s when prices go up so much in one day that
the market shuts down trading. They also do the same for
limit-down, but obviously when the price falls. By halting trading
they give investors and traders time to figure out what’s moving the
market.
Wheat went up so much that the exchange actually increased the ranges
for up and down limit movements. Basically, demand for food
products like wheat continues to grow around the globe.
If you can grow it, its value is probably going up.
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Now, this isn’t the first time we’ve pointed out this trend. As a
matter of fact just a week ago I authored an article, “Serious
Money in Farming.” I talked about growing demand for these
commodities on a global basis. I also mentioned a number of
investments that would benefit, including:
Deere (DE) – Provider of farm equipment.
Monsanto (MON) – Provider of seeds and herbicides.
Mosaic (MOS) – Provider of fertilizers.
Potash (POT) – Supplier of fertilizers.
These companies have performed so well over the last few months that
without exception they are all at, or very near, their 52-week highs.
Some have even reached multi-year highs as well. Several
subscribers have asked us about buying these stocks at these levels.
They’re concerned that they may be “chasing” the market.
That got me thinking.
Do we really want to chase these stocks? Maybe. Maybe not.
I happen to believe that we are in a multi-year bull market for
commodities. As a result, these companies should do well over the
next several years. Buying them on pullbacks could be a great way to
build a portfolio.
But there may be a different way to profit from the growth in the
agricultural industry.
I was doing some research when I came across a company that I found very
interesting. They’re one of the largest suppliers of corn and soy
seeds. They also provide insecticides and herbicides to help
farmers grow better crops.
The company sells more than $6.8 billion worth of product every year to
this growing industry. Amazingly, however, the company is trading
just off its 52-week lows! Why the discount? Simple.
Agricultural products aren’t the only thing the company sells.
Now before you call me crazy let me explain something. The whole
company generated more than $29.3 billion in revenue and $2.9 billion in
net income. Some 60% of that revenue came from sales outside the
US (this means the falling dollar helps their financials). The
agricultural side sold more than $6.8 billion of product (which grew 14%
year over year) and made more than $894 million in profit. This
represents more than 23% of the total business.
So, this company is not a new kid on the block. They’ve been
around for years, and just paid their 414th consecutive dividend – with
a yield around 3.5%. For those of you fast on the math, that’s a
dividend every quarter since 1904. On top of that, the company
reaffirmed guidance for 2008 (everyone knows how rarely that’s happening
these days!).
So, without further delay, my interesting idea for the day is DuPont
(DD) - the secret way to play the agricultural boom. Take a closer
look and see if they’re right for your portfolio.
• Dillard’s
(DDS) received an upgrade from Credit Suisse despite challenging times in the
retail sector. DDS traded higher on the news, but is still down
significantly over the last 12 months.
• Barnes & Noble (BKS) received a pair of downgrades
this week from JP Morgan and Credit Suisse. The company recently missed
fourth quarter profit forecasts. The stock recently hit a 52-week low on
the news.
• Freidman Billings recently initiated coverage on a number of medical
device stocks including: C. R. Bard (BCR), ev3
(EVVV), Lifecell (LIFC), and Medtronic (MDT).
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