ETF Talk: Satisfy Your Agricultural Appetite with MOO

Doug Fabian

Doug Fabian is known for his expert knowledge of ETFs, bear funds and enhanced index funds to profit in any market climate.

The world’s population could top nine billion people by the year 2050, according to projections, and all of those people are going to boost demand for food. Even today, developing nations and increasing populations are raising global demand for food production. As such, farming, and all its component stages, should benefit. The appropriately named Market Vectors Agribusiness (MOO) is an exchange-traded fund (ETF) which is invested in many of the farming industry’s various aspects and should profit from this need for heightened farm production.

This non-diversified fund seeks results which, before fees and expenses, match the performance of an index that tracks various fields within the farming industry, such as: agri-chemicals, fertilizers, seeds and traits; irrigation equipment and farm machinery; and agricultural products like flour, grain, meat, poultry and sugar, aquaculture and fishing, live stocks and plantations.

Though MOO has gained only 1.63% so far this year, the fund is capable of solid gains like 2012’s 11.90% rise. For investors interested in additional income, MOO offers a dividend yield of 1.80%. Although weather can have a big impact on agricultural output, the long-term prospects of this fund are compelling because of the continued certainty of global food consumption as the population grows.

Since MOO’s investments are spread out across the agricultural economy, this ETF has holdings in several sectors which assist and/or are assisted by farming. The biggest chunk, 52.47%, is invested in basic materials, while the remaining MOO assets are in consumer defensive, 27.51%, industrials, 17.86%, and consumer cyclical, 2.16%.

MOO’s top ten individually held companies comprise 58.25% of the fund’s total assets. And the top five of these holdings feature a fairly even distribution. In addition, these five holdings are companies that sell agricultural equipment, chemicals and seeds: Monsanto Company (MON), 8.33%; Syngenta AG (SYT), 7.60%; Deere & Company (DE), 6.71%; Potash Corp. of Saskatchewan, Inc. (POT.TO), 6.54%; and Archer-Daniels-Midland Company (ADM), 6.30%.

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There are risks inherent in investing in agriculture. One is that demand for agricultural products and supplies depends on commodity prices, such as grain. Another is the success of a harvest. Naturally, bad weather can be devastating. Although MOO’s performance can be hit in the short run due to these and other risks, demand for agricultural supplies ultimately will drive the fund’s performance in the long run, especially as rising populations demand increasing amounts of food.

Meanwhile, if you want my advice about buying and selling specific ETFs, including appropriate stop losses, please consider subscribing to my Successful Investing newsletter. As always, I am happy to answer any of your questions about ETFs, so do not hesitate to email me by clicking here. You may see your question answered in a future ETF Talk.

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