Food for Thought

05/05/2006 12:00 am EST

Focus:

Keith Fitz-Gerald

Editor, High Velocity Profits and Total Wealth

As a newer speaker at The Money Shows, I have not yet sat in on a workshop by Keith Fitz-Gerald , and doing so is at the top of my own "to-do" list for the Las Vegas show. Here's a look at his newsletter, The Skeptical Investor, an excellent guide to total portfolio development. 

"My latest recommendations focus on a basic need in China and India: food. The way I look at it, the leaders of both countries must be plotting ways to continue feeding a working population that accounts for two of every five people alive in the world today. The latest refinements in genetics and farming technology pioneered on our soil and in Europe have increased yields to levels the farmers of yesterday could only fantasize about.

"Not only that, genetically modified crops have become increasingly disease-resistant and have been tweaked to the point where they will practically grow in asphalt rather than the fertile fields they needed only a few years ago. There are nearly ten million farmers around the world growing genetically modified crops on some 250 million acres. This is a staggering 20% increase since last year. But what really gets my attention is that this number is expected to double in the next four years.

"When it comes to growing herbicide-resistant crops, acres of farmers across the globe look to St. Louis-based Monsanto (MON NYSE), the world’s largest biotech seed company. What Monsanto does is help farmers grow more crops by applying biotechnology, genomics, and molecular breeding technology to herbicides and seeds. It is estimated to hold 70% of the world’s insect and herbicide-resistant crop market share with its flagship product, Roundup, the world’s most-used herbicide.

"Monsanto’s insect-protected corn products are also expected to see significant growth in acres. International demand for soy has skyrocketed in recent years, driven by ever-increasing purchases by China for soy used in products ranging from animal feed to cooking oil. In a real boon for Monsanto, it has earned the blessings and business of China, which has granted permanent approval to a handful of biotech soybeans and corn from Monsanto—the first ever approval issued by the country.

"Monsanto also does a chunk of business in India. Work there began over 50 years ago as Machete, the first rice herbicide. Machete continues to be a leading weed control tool for farmers in Western India. The company’s pipeline also includes crop plants with improved tolerance of environmental stress, such as cold and drought; disease resistance; and nitrogen efficiency.Buy Monsanto for no more than $90 a share, and expect a 40%-plus gain in 12-24 months."

"Like Monsanto, Bunge Ltd. (BG NYSE) is a world leader—only three times over. It is the largest producer and supplier of fertilizers to farmers in South America, the world’s leading seller of bottled vegetable oils to consumers, and the world’s leading oilseed processor. Founded in 1818, Bunge has 25,000 employees and locations in 32 countries. Bunge sells commodities globally, selling products in over 90 countries.

"But the biggest Bunge news by far this year has been that the company agreed to purchase a soybean crushing and refining plant in Nanjing, China. As China’s largest river port and a critical transfer point for river, road, and rail logistics in the Yangtze River region, Nanjing provides access to some of the largest and fastest-growing meat-producing and oil-consumption regions in China.

"Bunge will supply the plant from its soybean origination networks in North and South America. Bunge also does a big business in Brazil, where it is the largest producer in the world’s fastest-growing fertilizer market and plans to invest $1.3 billion in Brazil over the next four years. Profitable and well-financed, Bunge grew by 15% a year from 2001 through 2004. In terms of net income, it grew by 52% a year over the same period. Paying at 12.5 times earnings, Bunge is a great bargain.Buy for no more than $55 a share and expect 40%+ in 12–24 months."

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