Posted by johnjoemorgan | Posted in Agricultural Equities | Posted on 06-12-2011
Proof We Were Right
(Extract from “Smart Investing Daily”)
30 Nov 2011 – Andrew Snyder, Editorial Director, Insiders Strategy Group
ConAgra Foods made a big move yesterday. It only shelled out $10 million, but its decision to buy more of a tiny food company proves we were right.
ConAgra Foods (CAG:NYSE) made headlines yesterday. What the company did yesterday proves our strategy is on the right track. Before the bell, ConAgra told us it opened its wallet and bought another $10 million worth of Agro Tech Foods shares. It’s now the majority owner of the Indian company. The move is great news for us for two reasons:
First… the food angle. The world is hungry. We’ve got 7 billion mouths to feed. Population growth is greatly outpacing the pace of crop yield expansion. It is a natural supply imbalance. By nabbing a stake in a country with some of the hottest growth and hungriest mouths, it puts its hands under a spigot of cash.
But there is more to this story. ConAgra is a rich company. It earns nearly 2 billion bucks a year and has over a billion in cash on hand. It could buy a lot of companies. But it chose tiny Agro Tech…. a small cap with a market value of about $200 million. It is not a coincidence a company like ConAgra is jumping into small caps – we believe this is the best time in a long time to invest in the little guy. Here’s why. It goes back to what I wrote on Nov. 21:
“With the exception of when fear is highest, small caps have a strong tendency to outperform their larger brethren. That means the time to buy is when fear is at its peak.”
Look around. Open up any newspaper. Turn on the TV.
Fear is everywhere. We’re scared of a meltdown in Europe. We’re scared the Occupy crowd will turn violent. We’re scared our government will destroy our great nation’s heritage. Because of it all, stocks are cheap. Some of the small caps we’ve looked at over the past few months are the cheapest they’ve been in over a decade.
Our strategy in this mess is simple… forget what you’ve been told. It’s time for unconventional techniques. It is exactly why I told my readers to buy shares of a small cap that is in the heart of the food industry.
We made our move with great timing. ConAgra tipped its hand yesterday. Valuations of companies across the food spectrum jumped… including our stake.
Despite the malaise created by political and economic uncertainty, opportunities remain. No matter how bad things get… we still need to eat.