BOSTON ( TheStreet) -- Billionaire investor George Soros has gone from gold bug to gaucho, as his hedge fund took a 23% stake in a South American farming conglomerate after dumping most gold holdings in the first quarter.
Soros' move underscores a growing trend among investors who are cutting back on gold and shifting into assets that can produce saleable products, such as farmland, and hence serve as an inflation hedge as well as a bet on the value of the land.
South America is the geographic hotspot for many of these companies due to its favorable growing climate, dearth of natural disasters, the availability of farmland and a minimal number of government restrictions on its ownership by foreigners.
And many companies there grow can grow sugar and corn which then have multiple uses for them depending on market conditions, either as human food, animal feed or to be converted into bio-fuels.Other hedge funds recently joining Soros down on the farm are the $18.7 billion Van Eck Associates fund, which is the largest investor in Brasil Foods (BRFS), with a 1% stake, and D.E. Shaw & Co., which is the largest shareholder of Argentine farm conglomerate Cresud (CRESY) at just under 9% of its shares, according to Securities and Exchange Commission 13-F filings. Renatto Barbieri, chief investment officer at Galtere Ltd., a New York-based private-equity firm that, among its many investments, runs a $1 billion agribusiness fund, said in an interview that "there is a global trend to be invested in, what we would call 'real assets,' and tangible assets in agriculture is very much a part of that basket." He said that's being driven by concerns over "climate change, food (supply) security and the health of the financial system. "And it's becoming clear, unfortunately, that agriculture has been mismanaged by public and private (entities) in the past so this is an area that offers tremendous opportunities in the future, and not just in South America. We may have food shortages" in the future, he said, and it is likely that governments will intervene if they see farmland in their country being manipulated by speculators. "The challenge is to be part of that solution," said Barbieri. Larry Fink, chief executive officer of BlackRock (BLK), the largest asset manager in the world with $3.5 trillion in assets under management, expressed a concise view on the outlook for agribusiness in a February interview with the Australian edition of the Wall Street Journal. His admonition: "Go long agriculture and water, and go to the beach." Here are five companies that are geographically diverse conglomerates with interesting long-term prospects:
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