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.
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
, with a 1% stake, and D.E. Shaw & Co., which is the largest shareholder of Argentine farm conglomerate
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
, 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."
with interesting long-term prospects:
has wide range of agricultural operations in Argentina, Brazil and Uruguay, as well as a renewable energy business through an ethanol production venture. It also has cattle and dairy operations, sugar plantations, and grows coffee, soybeans, corn and rice.
The company plans to use some of its IPO funds to build a $700 million sugar mill in Brazil that can also produce bio-fuels.
Adecoagro was founded in 2002 by investors, including Soros, to buy Argentine farmland after the peso crashed. It is now the largest holding in Soros Fund Management's stock portfolio, at 23%. That stake was worth $366 million as of March 31.
The company has a 27% institutional investor ownership, led by Wellington Management at 4% of its shares at the end of the first quarter, followed by Oppenheimer Funds, at 3%, according to SEC 13-F filings.
initiated coverage of Adecoagro with a "buy" rating and a 12-month price target of $15. Its analysts wrote in a research note that the company "has favorable land assets and water access, with a South American climate (that is) very favorable for crop production and land development."
It added that the additional demand for crops for use in bio-fuels will drive "sustainable upward pressure on commodity prices" that should create steady earnings growth.
Its shares, now trading at $11.11, are down 12.5% since its initial public offering, giving the company a market value of $1.3 billion.
A smaller version of Adecoagro is
, which owns and leases farms in Argentina's Pampas region and is a land developer.
The company is also a producer of agricultural commodities, including a wide range of crops, beef and milk.
It is expanding its agricultural operations into Brazil, Bolivia and Paraguay.
Cresud also invests in commercial and residential real estate in Buenos Aires.
D.E. Shaw & Co., a New York-based investment firm, holds a 9% stake, the biggest of any investment firm. Shaw is headed by David Shaw, a Ph.D. who taught computer science at Columbia University and is a renowned expert in computational biochemistry.
Institutional funds own 40% of its shares. Only one analyst follows the company, and he gives it a "hold" rating, according to FactSet.
The stock is pricey, with a trailing price-to-earnings ratio of 25.7, versus the industry average of 12.
Its shares are down 8.7% this year but up 54% over the past 12 months, giving it a market value of $849 million.
is a Brazil-based food company engaged in the production and sale of poultry, pork, beef cuts, milk, dairy products and processed food products.
Its international operations reach more than 110 countries and it sells over 3,000 products both domestically and abroad. Formerly known as Perdigao, it is the biggest food processor in Brazil.
The $18.7 billion hedge fund Van Eck Associates bought 2.6 million shares of the company in the first quarter of this year, adding to its stake of the past two years. It now owns 1% of its shares, the largest stake of any investor.
Analysts give Brasil Food's stock six "buy" ratings, one "outperform," five "holds" and two "sells," according to FactSet.
It has a price-to-earnings ratio of a whopping 32, versus the average of 15.8 of the S&P 500 companies
Shares are up 8% this year and have gained 47% over the past year, giving it a market value of almost $16 billion.
, headquartered in White Plains, N.Y., is a global agribusiness and food company with operations along the farm-to-consumer food chain.
The company is a leading oilseed processer and seller of packaged vegetable oils. Bunge also distributes fertilizers, mainly in South America, and grows and processes Brazilian sugarcane to produce sugar and ethanol. The firm operates in more than 30 countries.
It recently sold its phosphate mines and acquired sugar mills. The company is still essentially a middleman between farmers and food companies, say Morningstar analysts who cautioned that "the commodity agriculture products Bunge moves around the world are readily available from competitors and the company has little pricing power over the products it buys and sells, making for razor-thin margins."
Bunge reported a strong first quarter, with earnings of $1.49 per share versus 31 cents per share last year. Sales rose 26% to $13 billion.
Analysts give Bunge shares four "strong buys" and six "holds," per TheStreet's ratings review.
Its shares are up 13% this year and 55% over the past 12 months, resulting in a market value of $11 billion.
is the majority shareholder of Cosan SA, one of the largest producers of sugar and ethanol in the world. Its primary production operations are in Brazil.
initiated coverage of Cosan with a "buy" rating May 10, giving it a 12-month price target of $11.44.
The Goldman analyst wrote: "We see the sugar and ethanol industry going through a transformational change, where the best opportunities will be captured by players vertically integrated across the chain, either through physical investments or partnerships. Early movers have a greater chance of success, in our view, and Cosan has been leading the development of this industry."
Analysts give it two "strong buy" ratings, two "moderate buys" and two "holds," according to a survey by TheStreet.
Its shares are down 19% this year but up 41% over the past 12 months. The company has a market value of $3 billion.
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