Don't Sleep on Agricultural Commodities

The minor rebound in agricultural commodities prices recently has moved a few analysts back to the bullish side of the aisle on stocks in this sector. While investors should still proceed with a degree of caution toward all segments of the stock market, I, too, am very intrigued by the agricultural chemicals companies especially in the wake of the blowout earnings report from Monsanto (NYSE: MON) yesterday.

With oil prices likely to remain at these depressed levels, Monsanto and its competitors stand to benefit greatly from margin expansion. In contrast to the traditional chemical and plastics companies, the agricultural chemical companies have little operational leverage, making them near-immediate beneficiaries from plunging oil and natural gas prices. It seems as if little has been made of this once-hot group in the financial media and to me that is good news. If you are worried you are too late on Monsanto, another name worth considering is Syngenta (NYSE: SYT), the Swiss ag chemicals giant.

*Disclosure: MON and SYT are holdings in the global agriculture UIT portfolio on which the author's firm serves as portfolio consutlant.

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