With the Facebook IPO launching next week, and a string of hot technology IPOs in the last year, all of the focus has been on Silicon Valley and social media wunderkinds.
Yet there’s a sector that has been quietly wracking up record earnings in 2011 and which is poised to do the same in 2012. Not only that, it’s cheap, with many companies trading with single digit P/Es, well under the average of the S&P 500 which is 13.
What is this mysterious sector?
The U.S. Department of Agriculture is expecting a record corn crop of 48 million tons of corn, up 4.5 million tons, this year. It’s projected to be the largest crop in the last 75 years.
Globally, corn production is expected to rise 10% to 946 million tons as several countries post records.
This has lit a fire under farmers who have gone on a buying spree of new tractors, combines, fertilizers and crop protection supplies.
Investors, however, have been ignoring many agriculture stocks which have led to rising earnings estimates and low valuations, a juicy combination.
Different Kinds of Agriculture Stocks
When you think of an “agriculture stock” you may think of a seed maker like Monsanto or an equipment manufacturer like Deere. But agriculture can encompass an assortment of different areas.
The top three industries in which to find agriculture stocks are:
- Farm Machinery
- Agriculture Products
Farm Machinery is the hottest of the industries. It has a Zacks Industry Rank of 6 out of 265. Four of the nine stocks in the industry are Zacks #1 Rank (Strong Buys). This is where you’ll find Deere and the other equipment makers.
— Zacks Investment Research