Investing in Feeding a Growing World Population

Jim Woods

Jim Woods has over 20 years of experience in the markets from working as a stockbroker, financial journalist, and money manager.

As an exchange-traded fund (ETF) tied to the global agriculture industry, the VanEck Vectors Agribusiness ETF (MOO) is in a fairly concentrated area of the market, but one with significant potential.

According to a 2015 McKinsey & Co. report on global opportunities in the agriculture field, food and agribusiness — agriculture conducted using commercial and technological means — had a total global footprint of $5 trillion. Feeding the global population has become an important issue again in recent years, and it is attracting the attention of global investors.

On a broader scale, the agribusiness industry, MOO’s primary focus, has been growing a steady clip. The McKinsey & Co. report stated that global investments in the food and agribusiness sector grew threefold to more than $100 billion from 2004 to 2013.

However, on an individual level, MOO has also been seeing a significant amount of attention from large institutional investors. For example, IFP Advisors boosted its position in MOO by over 6,000%, among several other institutional purchases.

Although MOO has more than half its portfolio weighting in the U.S. and Canada, agribusiness in South America, where MOO has a small 3% allocation, is showing a lot of potential and could impact the fund’s global allocations in the near future. A 2018 report by Valoral Advisors indicated that mergers and acquisitions (M&A) activity has been increasing steadily since reaching a low point in 2015, when political uncertainty and low commodity prices impacted Brazil and Argentina.

MOO invests heavily in large-cap companies and has a weighted average market cap of $18.5 billion, as well as a price-to-earnings ratio of 19.2. Although the fund is up only 3.5% year to date, it has seen price appreciation of more than 50% since early 2016. Investors can also pick up a small yield of 1.4%. The expense ratio is 0.51%.

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As the global agriculture sector is fairly compact, the VanEck Vectors Agribusiness ETF portfolio is only comprised of 58 holdings, with the top three sector weightings being Consumer Defensive, 35%; Basic Materials, 28%; and Industrials, 19%.  The top 10 individual holdings comprise 52.54% of total holdings and are led by Nutrien, 8.40%; Deere & Co., 7.50%; Zoetis, Inc., 7.28%; Archer-Daniels Midland, 6.50%; and IDEXX Laboratories Inc., 5.14%.

The VanEck Vectors Agribusiness ETF (MOO) offers investors a chance to participate in growth trends in feeding the world’s population, and some access to one of the few positive markets in frequently unstable South America. Investors interested in either of these potential trends, or in having greater exposure to agriculture, may want to perform their own due diligence on MOO.

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