This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Farmland, South American Style

Stocks in this article: CRESY

NEW YORK ( TheStreet) -- Last week, I made the case that farmland is an asset class, and one that I consider to be an important piece of my portfolio.

Even though there aren't many publicly traded agriculture plays, over the years, I've discovered and purchased a handful. A conversation with a colleague yesterday, who buys and manages farms in the western U.S. as investments, was a great reminder of why farmland can be such an important part of a portfolio: diversification benefits.

Historically farmland has been positively correlated with inflation, so it is an inflation hedge, but over long periods of time it has been negatively correlated with equities. In other words, the diversification benefits can be huge, in an era when correlations among many asset classes are very high.

Of course, owning publicly traded companies that own farmland still exposes you to the equity markets, but short of going out and buying land, these companies are as close as many investors can get -- at this point, anyway -- to farmland exposure.

One of the more interesting farmland plays that I own is Argentine company Cresud (CRESY - Get Report). As of March 31, the company managed 34 farms with a total of more than 2.3 million acres of land. For perspective, that's the equivalent of 3,700 square miles, an area that is roughly two-thirds the size of Connecticut. Nearly two-thirds of the land is located in Argentina, with 19% in Brazil, 13% in Paraguay, and 2% in Bolivia.

CRESY Chart CRESY data by YCharts

Cresud's market cap is just $431 million, but the company has about $1 billion in debt, for a total enterprise value of about $1.3 billion. Considering the company's assets, that is a small enterprise value.

In addition to its other assets, Cresud also owns 64.5% of Argentine real estate company IRSA (IRS), which currently has a market cap of $540 million.

That puts the value of Cresud's IRS stake at $348 million. The company also owns 40% of BrasilAgro (LND), worth about $100 million.

The natural question is why a company with such a vast array of assets has such a small market cap, and the answer is location.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Jim Cramer and Stephanie Link reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

Jim Cramer's protégé, David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
Try it NOW
Try it NOW
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

Jim Cramer's protégé, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,191.37 -195.84 -1.13%
S&P 500 2,002.16 -27.39 -1.35%
NASDAQ 4,637.9940 -43.5030 -0.93%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs