How to Invest in Food Stocks

Beyond the ethanol and agriculture (or "ag") buzz, there are several things to be learned about investing in food and food-related companies. You need to understand the food development process -- from the farm to our mouths -- and how to identify each step along that food itinerary to recognize the investment opportunities (and risks). I refer to this path from farm-to-portfolio as the food investment chain. In this installment of the Finance Professor, I will look at this chain and help sort out the wheat from the chafe for your portfolios.

Down on the Farm With Machinery Manufacturers

We have to start with Mother Earth. Farmers need to get their farmland prepared to plant crops. Later on, once the crops are mature, the farmers will need to harvest those crops. In order to do this, they need to have farm machinery.

Efficient and productive agricultural equipment is vital to increasing farmers' yield. They require tractors, combines, harvesters, tillers, seeder and sprayers to achieve their objectives. With its deep agricultural and industrial heritages, the United States is home to the largest manufacturers of such equipment, however some international competition has garnered significant market share. ...