Archer Daniels Midland Company (ADM), Deere & Company (DE): There’s Money to Be Made in Food and Agriculture Stocks

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Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you’d like to add some agriculture-related stocks to your portfolio but don’t have the time or expertise to hand-pick a few, the cutely tickered Market Vectors Agribusiness (ETF) (NYSEARCA:MOO) could save you a lot of trouble. Instead of trying to figure out which companies will perform best, you can use this ETF to invest in lots of them simultaneously.

Deere & Company (NYSE:DE)

The basics
ETFs often sport lower expense ratios than their mutual fund cousins. The Market Vectors Agribusiness (ETF) (NYSEARCA:MOO)’s expense ratio — its annual fee — is 0.54 %, and it recently yielded about 1.8%.

This ETF has underperformed the world market over the past three and five years. It’s the future that matters most, though. And as with most investments, of course, we can’t expect outstanding performances in every quarter or year. Investors with conviction need to wait for their holdings to deliver.

Why agriculture?
It’s hard to say with much certainty what many industries will look like in the future, but we can be pretty sure that our planet’s growing population will continue to require food.

More than a handful of agriculture-related companies had strong performances over the past year. Archer Daniels Midland Company (NYSE:ADM), for example, surged 37%, and is admired for its vertical integration, featuring farms, processing plants, and more. Its last quarter featured revenue slightly up, but earnings down, in part due to last year’s droughts. The company remains a solid dividend payer, though (recently yielding 2.1%), and is looking to expand in Asia via its purchase of Graincorp Ltd (ASX:GNC), Australia’s leading agribusiness. It has also been upgraded from underweight to neutral by analysts at JPMorgan Chase & Co. (NYSE:JPM), who think it will benefit from lower corn prices, but it still features low margins and doesn’t seem very undervalued right now. Archer Daniels Midland Company (NYSE:ADM) is considering selling its cocoa business amid falling cocoa prices.

Deere & Company (NYSE:DE) gained 14% and yields 2.4%. The stock seems attractively valued, with its current and forward P/E ratios of 10 and 9, respectively, well below its five-year average of 15. The company is posting robust growth, though its free cash flow has been in the red. Deere & Company (NYSE:DE) expects continued equipment sales growth, particularly from Latin America, but construction and forestry sales are projected to fall this year. Deere & Company (NYSE:DE) faces competition, too, such as from Japan, and some are looking for cost-cutting from the company.

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