Owning farm-related stocks has paid off nicely since I wrote about the sector back in February and April. That's partly due to the run-up in harder assets that we've seen this year, but also because the market's rising tide has lifted many boats -- including four farm stocks that I wrote about earlier this year.
All four are smaller-cap names, and small-caps have outperformed large-caps in recent months. After all, smaller companies tend to fall further during stressful periods and recover more sharply during rebounds. That's why the Russell 2000 and Russell Microcap indices are both up about 20% year to date, while the S&P 500 has gained just 12%.
Let's update how the four agricultural stocks that I previously wrote about are doing these days:
Argentine farming company Cresud has been a big winner, soaring by 54% since I last wrote about it in February. Cresud owns nearly 2 million acres of farmland, as well as 63% of NYSE-listed IRSA (IRS) and a wide array of other assets.
CRESY could be benefiting from last November's election of new Argentine President Mauricio Macri. A more pro-business leader, Macri came to office following a decade of strong-armed interventionist policies by former Argentine President Cristina Kirchner and her husband predecessor, Nestor Kirchner.
I've owned CRESY on and off for years, and while it's been very volatile, a freer, more-stable Argentine economy should better support the stock.
This stock has gained about 45% since I wrote about it in February. LMNR grows pistachios, olives and citrus fruit on 7,500 acres of farmland that the company owns in California and Arizona.
I was originally attracted to Limoneira (which traded on the "pink sheets" before joining the "regular" Nasdaq Stock Market in 2010) in part due to the company's ownership of some valuable California water rights.
But LMNR is more of an asset play, as it never seems to trade at a low price-to-earnings ratio. For example, Limoneira's current trailing-twelve-month P/E is about 108.
Farmland Partners (FPI)
This REIT is the laggard of my farming group, up just 12% or so since February.
FPI acquires and manages U.S. farms and owned or had 268 such properties under contract in 14 states as of late June. Its holdings total about 114,000 acres, which equals some 178 square miles of land.
The stock currently yields about 4.4%.
Alico owns some 121,000 acres of farmland in three Florida counties, where it primarily grows citrus.
The Bottom Line
There's been a growing recognition by investors in recent years of farmland as a distinct asset class. As a result, farmland prices have risen sharply in certain areas -- to the point where some believe that we now have bubble-like conditions.
But personally, I prefer to follow the words of Mark Twain, who once famously said: "Buy land. They're not making any more of it."