Forget complex derivative strategies. The smart money is taking a more simplistic investing approach to combat anticipated hyperinflation. So what's the latest fund fad? Farmland.
Gold with a yield
Farmland flourishes in periods of high inflation. Historically, the value of farmland has a 90% to 95% correlation with inflation. In addition, farmland yields a crop, which increases in value as the dollar decreases in value.
And a decrease in the value of the dollar is well under way. The Consumer Price Index pegs inflation at around 1.5%, but many bright financial minds claim inflation is closer to 6% or 7%, with the worst yet to come. As a result, many institutional investors are plowing money into farmland.
BlackRock (NYSE: BLK) has taken a multimillion-dollar position in farmland. And one hedge fund claims to be one of the largest arable landholders in the country.
So how does the ordinary investor without access to billions of dollars capitalize on the flight to farmland? Agriculture stocks are a good place to start.
Aggie stocks
PotashCorp (NYSE: POT) and Mosaic (NYSE: MOS) stand to benefit from the farming boom as demand for fertilizer increases. CEO Bill Doyle is so confident in the future of farming that he helped fend off a takeover bid in which he stood to pocket over $400 million for his portion of PotashCorp.
Seed maker Monsanto (NYSE: MON) is another good way to invest in the ag boom. In addition, the company provides investors exposure to emerging markets.
Also be on the lookout for farmland REITs. Gladstone Investment (Nasdaq: GAIN) is set to launch the first publicly traded farmland REIT, named Gladstone Land. The trust owns six commodity-producing farms in California. Other funds are expected to follow as investors clamor for exposure to farmland.
The bottom line
The smart money is betting big on farmland as inflation concerns mount. Now's the time to consider following the smart money by adding some agriculture to your portfolio.
- Add PotashCorp to My Watchlist.
- Add Mosaic to My Watchlist.
- Add Monsanto to My Watchlist.
