ETF Talk: Veggies May Pep up Your Portfolio

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 last few ETF Talks have highlighted broad-based agricultural funds, but today’s featured exchange-traded fund is one that is focused on a narrow part of the sector: food production. This week’s featured ETF is the iShares MSCI Global Agriculture Producers Fund, which has an amusing ticker symbol: VEGI.

This fund tracks an index that follows public companies engaged both directly and indirectly in providing food to consumers. The foods include vegetables, as well as feed for livestock. This non-diversified fund seeks investment results which, before fees and expenses, correspond generally to the performance of an index that tracks companies primarily engaged in agriculture in both developed and emerging markets.

VEGI has traded mostly flat this year, gaining only 0.78%. But in 2012, starting from its inception in February of that year, VEGI grew a solid 5.60%. For investors interested in additional income, VEGI offers a dividend yield of 1.21%. Since it focuses solely on a narrow segment of farming, the fund has no other investments to mitigate any losses. So, a bet on VEGI is highly dependent on the success or failure of each harvest. However, with food always a necessity, and with demand rising all over the world, expect VEGI to notch long-term profits.

VEGI’s three major areas of investment are in basic materials, 54.18%; consumer defensive, 27.52%; and industrials, 17.31%. These investments total 99% and leave the remaining areas of investment in consumer cyclical, financial services, healthcare, utilities, communication services, energy and technology.

As for individual companies, VEGI’s top ten holdings comprise 61.07% of the fund’s total assets. The top five are: Monsanto Company (MON), 13.72%; Sygenta Ag Basel (SYENF), 9.31%; Potash Corp of Saskatchewan Inc. (POT.TO), 8.11%; Deere & Company (DE), 7.61%; and Archer-Daniels-Midland Company (ADM), 5.33%.

With food always in demand, and with the entire farming sector both focused on and dependent on agricultural production, a bet on VEGI could lay seeds for the fund’s investors to achieve profitable returns.

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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