Former Hedgie’s Farmland Outlook Bodes Well For Ag Stocks (POT, BHP, MOS, MON, CF, LNN, TITN, ARTW)
Michael Burry, whose Scion Capital won big on bets against the U.S. housing market before closing its doors in 2008, told Bloomberg he’s been putting “a good amount of money” into farmland. “I believe that agriculture land — productive agricultural land with water on site — will be very valuable in the future,” he explained, and while the stance doesn’t point to a direct bull case on agricultural equities, if Burry is on target, it could mean good things for fertilizer and irrigation plays.
The supply and demand equation for natural resources is in play in the agricultural space, where farmers seek to maximize the output of their land with chemicals, supplemental water supplies, efficient harvesting technology, and other investments. If the value of arable land increases as Burry predicts, logic would suggest that fundamental demand drivers are at work, and optimal output will be of increasing importance.
As a whole, the Agricultural Chemical and Fertilizer Stocks Index is outperforming the S&P 500 fractionally over the last month. Potash Corp (POT) is the sector’s top performer for the period after spurning a buyout bid from BHP Billiton (BHP), and Mosaic Company (MOS) has also gained double-digits on a sympathy rally.
Potash was the Pros’ favorite fertilizer stock at the end of the second quarter, with 39 13F-filing asset managers counting shares in their top-15 U.S.-listed equity positions. Meanwhile, Monsanto Company (MON) and CF Industries Holdings (CF) were also in the top holdings of more than 20 Pros respectively, according to the latest regulatory filings.
Lindsay Manufacturing (LNN), which specializes in automated agricultural irrigation systems, is among the top one-month performers in the Farming, Mining, and Construction Machine Stocks Index, as are agricultural plays Titan Machinery (TITN) and Art’s-Way Manufacturing Co. (ARTW).
It will be interesting to see whether Burry’s farmland investments pay off, and where the agricultural equity space goes from here. Investors can track the above Indexes for performance trends and a suite of other metrics at tickerspy.com.
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