George Soros is one of the biggest names in commodities, as he is largely known for his success running the Quantum Fund with Jim Rogers. In recent years, Soros has been something of a gold bug, making huge allocations to the SPDR Gold Trust (GLD). But there is another commodity holding that Soros has that may intrigue investors, as it falls in line with the predictions and strategies of many other players, including Jim Rogers [for more commodity news and analysis subscribe to our free newsletter].
Soros has a $232 million stake in Adecoagro (AGRO), an agribusiness company with the majority of its operations spanning throughout Brazil, Argentina, and Uruguay. The company has its hands in almost every corner of the agriculture world and has caught the attention of some well-known investors. As of the end of last year, the company owned more than 290,000 hectares of farmland, a lucrative investment on its own.
Historical data reveals the appeal of this timeless hard asset; between 1987 and 2004, farmland prices averaged annual increases of 4.8%. What’s even more exciting is that prices have gone onto appreciate even more rapidly in recent years thanks to record-low interest rates and steadily growing demand for commodities. Farmland prices have averaged annuals gains of 15% between 2004 and 2008, showcasing the ability of this asset class to deliver uncorrelated returns to broad equity markets.
Aside from that, agricultural firms have long been coveted by many investors given that they can serve as inflation hedges. When inflation strikes, food prices are among the first to jump, which leads to higher revenues from agribusiness firms and therefore more gains for the investor [see also Three Alternative Sources for the Current Inflation Rate].
AGRO The Stock
The stock has a market cap of about $1.15 billion and trades right around 160,000 times on an average day. It currently has an EPS of 0.17 and a P/E ratio of just over 56. The firm will report earnings in mid-November, but as of their most recent quarterly results, their yoy quarterly revenue had shrunk 11%. Other noteworthy financial stats is the fact that current debt nearly doubles cash on hand, something that may ward off potential buyers.
The stock went public early last year and is down considerably from its debut, but for 2012, AGRO has scraped up gains of 12.3%. The stock is certainly a risky play, but with the likes of George Soros buying the security and a seemingly bright future for the ag industry, it certainly demands a closer look.
Disclosure: No positions at time of writing.