Wilted Ag Sector May Grow Anew

Let's take a look at a couple of exchange-traded funds that may give investors an opportunity to take advantage of extremely oversold conditions in this sector.

The first fund is the Market Vectors Agribusiness (MOO Quote). This fund's objective is to closely replicate the price and performance of the DAX Global Agribusiness Index. The fund's mandate is to invest at least 80% of its total assets in equity securities in worldwide companies engaged in agriculture.

The top five holdings of this fund are Syngenta (SYT Quote), Monsanto (MON Quote), Potash (POT Quote), Deere (DE Quote) and Mosaic (MOS Quote). The fund holds 7% to 8% of its assets in each one of these companies.

The chart below shows that since the high in June, the price of the ETF has fallen more than 50%. Currently, many of the companies in this fund are trading at extreme discounts to earnings, and that may signal an opportunity to contrarian investors.

Click here for larger image.

Source: TC2000

If you want to invest directly in the commodities, consider the Powershares DB Agricultural (DBA Quote) ETF. This fund is set up to track the Deutsche Bank Liquid Commodity Index, which is intended to reflect the agricultural sector. The index currently consists of commodities such as corn, soybeans, wheat and sugar.

Tthis fund has also had its troubles, dropping more than 30% from its July highs. The current price is extremely oversold and due for at least a snapback rally.

Click here for larger image.

Source: TC2000

Current market conditions can certainly push these funds lower than they are now, but over the longer term I think that the agricultural sector will turn out to be an extremely profitable venture. The key of course is to take small bites and to use protective sell-stops in case the selling accelerates.

1 What would best describe your stance heading into the coming week of trading? Bullish Bearish Neutral 2 Which of these sectors do you think is set to move up in the coming week? --Choose One--Aerospace and DefenseAirlinesAutomobilesBeverages and Food ProductsBiotechnologyCommercial BanksComputers and PeripheralsConsumer NondurablesEnergy Equipment & ServicesHMOs and HospitalsHomebuildingInsuranceIntegrated OilInternet, Software ServicesInvestment Bankers and BrokersMediaMultiline RetailPharmaceuticalsPrecious MetalsSemis, Semi EquipmentTelecom EquipmentTobacco and AlcoholWireless CommunicationsUtilities 3 Which of these sectors do you think is set to move down in the coming week? --Choose One--Aerospace and DefenseAirlinesAutomobilesBeverages and Food ProductsBiotechnologyCommercial BanksComputers and PeripheralsConsumer NondurablesEnergy Equipment & ServicesHMOs and HospitalsHomebuildingInsuranceIntegrated OilInternet, Software ServicesInvestment Bankers and BrokersMediaMultiline RetailPharmaceuticalsPrecious MetalsSemis, Semi EquipmentTelecom EquipmentTobacco and AlcoholWireless CommunicationsUtilities View the results without voting