English: Deere & Company World Headquarters building in Moline, Illinois, USA (Photo credit: Wikipedia)
During a recent interview with Investment U, Jim Rogers revealed his favorite place to invest now.
It’s not gold. It’s not technology.
It’s not copper, or oil… or emerging-market stocks.
It’s dirt. More specifically, Rogers likes agriculture.
The sector’s performance is starting to back him up, too.
During one recent 12-month span, the bellwether DB Agriculture Fund (NYSE: DBA) soared 26.4%, outpacing the S&P 500 by 63%.
When the debt downgrade hit U.S. Treasuries in August 2011, DBA dropped 4.42% while the broad market tumbled 16.67%.
Agriculture, right now, is proving more profitable – and safer – than the broad stock market.
Take a look:
Rogers sees the trend continuing for the foreseeable future.
If his latest analysis of the global economy is accurate, “everybody who has a second home in Iowa would be rich,” says Rogers.
Rogers has long been known as the world’s leading commodity investor. (His track record, as you may know, includes co-founding the Quantum Fund, which soared 4,200% in 10 years versus 50% for the S&P. He’s also penned numerous bestsellers, which should be required reading for any serious investor.) And earlier this year he restated his belief that all commodities are in a bull market that has years to run.
But he singled out agriculture as the best sector right now.
Rogers’ Rationale: Why Agriculture Could Soar
This is a man known for doing his homework. And that’s what has led him to this conclusion.
For starters, agriculture has been a backwater sector for decades. That has created value.
“Over the last 25 or 30 years, agriculture’s been a horrible way to make money throughout the world. As a result, we have virtually no farmers,” Rogers pointed out in a recent interview withInvestment U Executive Editor Garrett Baldwin.
“According to the U.S. Government, the average age of farmers in America is 58 years old. In 10 years, they’re going to be 68 years old… if they’re still alive.
The shortage of farmers will lead to a shortage of farm production. And these shortages equal opportunity with commodities.
“If you get out the Department of Education’s numbers for the past 50 years,” says Rogers, “You’ll see a dramatic decline in the number of students studying agriculture, mining and petroleum engineering.”
“We don’t have any new farmers,” Rogers says. “Second of all, the [experts] are pretty old and are going to be going out of business. It’s a huge mess we have that’s developing in the world, and you’re going to see more and more shortages develop.
“We already have very low inventories on a historic basis for agricultural products. And even if we have a great local crop this year or next, so what? It’s going to be consumed very quickly because the inventory levels are already so low.”
In the future, Rogers sees farmers driving Porsches… and Wall Street brokers driving junkers.
He’s very serious about this.
“You know, the stock brokers are going to be broke,” says Rogers, foreshadowing what he sees as an increasingly diminished role for the financial sector. “All the farmers are going to be stunningly rich.”
How to Invest in the Coming Agriculture Boom
The bottom line for investors, Rogers says, is to participate in the coming agriculture boom however you can. That can include investments like stocks, of course.
But for those with flexibility, he suggests more creative ways to build wealth.
“You want to buy a lake house, buy it in Iowa or Oklahoma. Don’t buy it in Massachusetts,” he says.
Rogers continues: “Buy where the people are going to be rich. Open yourself a chain of restaurants in the agriculture area or department stores or hotels. Anything that you want to do in an area where people are making lots of money, you’ll make a lot of money, too… just because they’re rich.”
On a more conventional-investing level, Rogers sees plenty of opportunity, as well. “Certainly, the seed manufacturers and tractor manufacturers, backhoe dealers, everybody who has anything to do with production of raw materials is going to get rich.”
Some ways to invest include…
Deere & Company (NYSE: DE): The maker of John Deere tractors and equipment is the blue chip of the sector.
AGCO (NYSE: AGCO): Another farm-equipment manufacturing powerhouse, but on a smaller scale… AGCO could have plenty of room for growth, holding a large chunk of Brazil’s tractor market.
CNH Global (NYSE: CNH): The second-largest maker of farm equipment on earth, but less than half of Deere’s market cap.
Seeds and Fertilizers:
Potash Corp. (NYSE: POT): Like Deere, a stalwart of the sector, selling fertilizer and seed products across the U.S. and Canada.
Monsanto (NYSE: MON): Produces seeds for global markets, along with proprietary genetics and other products.
Syngenta AG (NYSE: SYT): This seed giant puts the focus on hybrid and synthetic seed technologies.
Plum Creek Timber (NYSE: PCL): This real estate investment trust owns timberland across the U.S. and pays a very healthy dividend.
Weyerhaeuser Company (NYSE: WY): For over 110 years, Weyerhaeuser has set the standard for the timber industry.
PowerShares DB Agriculture ETF (NYSE: DBA): Tracks the Deutsche-Bank Agriculture Index and is one of the oldest agriculture ETFs in the world.
Market Vectors Agribusiness ETF (NYSE: MOO): MOO contains a basket of stocks tracking the DAXglobal Agribusiness Index.
IQ Global Agribusiness Small Cap (NYSE: CROP): A more aggressive fund that tracks the index by the same name. Holdings include Tractor Supply, Viterra and Nufarm Limited, Australia.
But perhaps the single best investment for average investors would be Rogers’ own fund:ELEMENTS Rogers International Commodity Agriculture ETN (NYSE: RJA).
This ETN tracks Rogers’ own index by the same name. The fund has been outpacing DBA in recent years.