NEW YORK (
TheStreet) -- If some agricultural equities look a little exhausted these days -- especially as underlying commodities prices turn south across the board -- that doesn't mean that investment prospects in the sector have dried up, at least according to one hedge-fund portfolio manager focused on the farm business.
"We find opportunities that are not mainstream," says Ejnar Knudsen, who has run
Passport Capital's agricultural-focused fund since its inception in March 2009.
Knudsen is a long-term bull on ag for reasons shared by many other investors: global population growth, and the rising middle classes in China, India and other emerging economies, which will put pressure, they say, on food supplies.
Still, Knudsen knows that danger lurks when it comes to the more obvious agricultural stocks -- such as
Archer Daniels Midland
"If you're in some of the more popular names, you either have to be much more tactical, or you have to be really long term in order to handle these downdrafts," Knudsen says. "If the world catches flu, some of these popular ag names will also catch flu."
That's why Knudsen looks for food and agriculture stocks "that have a margin of safety and don't have a lot of hot money poured into them." There are companies out there trading near book value, he says, or at multiples (six times EBIDTA, say), that offer "attractive opportunities."
"You could have the world reset at lower levels, and these companies will still do well," says Knudsen.
four of Knudsen's overlooked agrarian favorites