Join date: Mar 19, 2022

Investors have warmed to supermarket chains Kroger and Albertsons in the past year: Kroger stock is up 58%, to a recent $56, while Albertsons is up 92%, to $36. Their margins tend to widen in periods of inflation as they raise prices more than costs rise and consumers trade down to makanan khas jawa timur more-profitable private-label products.

Neither stock is expensive. Albertsons trades for 12 times projected earnings in its current fiscal year, and Kroger for 15 times.

The knock on them is that they are relatively high-cost retailers because of their heavily unionized workforces and over time they will be market-share losers to Walmart (WMT), Target (TGT), and Costco Wholesale (COST). Nonetheless, the companies have capitalized on convenience and data on shopper preferences to hold their own.

The war in Ukraine has turbocharged a bull market in grains because the country, once known as the breadbasket of the Soviet Union, has been a large exporter of both wheat and corn.

U.S. farmers are already profiting, with corn up over 35% in the past year to $7.43 a bushel. Wheat has been an even bigger winner, up more than 60% in the past 12 months, to $10.74 a bushel, after spiking to $14 after the Ukraine war began.

As farmers do well, so does Deere, the dominant maker of farm equipment. Its initiatives to help farmers improve yields, reduce fertilizer usage, and electrify its fleet are exciting investors, including those who follow environmental, social, and corporate governance, or ESG, principles.

“With its technology and its R&D spending, Deere is building a bigger moat around its business,” says Seth Weber, an analyst at Wells Fargo. “It takes the Deere narrative from how many tractors are you selling to what value you are adding for farmers.”

In addition to a strong U.S. farm economy, bullish factors include a relatively old tractor fleet in the U.S., where new combine harvesters can cost as much as $750,000.

Deere aims to get 10% of its sales from software-like recurring revenue by 2030. The shares trade at about $406, or 17 times projected 2022 earnings. Weber has an Overweight rating and a price target of $455 on the stock.

Agco has a 10th of the market value of Deere and is a pure play on farm equipment. Its shares, at about $132, trade at a big discount to Deere at 11 times projected 2022 earnings. Agco gets more than half of its sales in Europe, while Deere gets 50% in the U.S.

Weber is bullish on Agco, pointing to a new management team and what he calls a “self-help story.” Agco is also looking to monetize data from its equipment and sell it to farmers. He has an Overweight rating and a $175 price target on the stock.

Bunge is also a play on strong grain markets. Its crush margins on soybean and other oils tend to widen when grain prices are high and the grain in its elevators appreciates.

Volatile markets can also provide more opportunity for its trading business.

“There could be a lot more volatility and turmoil in grain markets in the next few months.”

— Sal Gilbertie, CEO of Teucrium

Bunge is Moskow’s favorite food play for “capitalizing on the inflationary environment.” The shares, at about $105, trade for 10 times projected 2022 earnings. He has an Outperform rating and a $115 price target on the stock.

Grains have historically been good diversifiers in portfolios, but there is more risk now. There is uncertainty about the outlook for Ukraine’s winter wheat crop, which is due to be harvested in a few months, and for the summer corn crop that is yet to be planted.

“There could be a lot more volatility and turmoil in grain markets in the next few months,” says Sal Gilbertie, CEO of Teucrium, which operates the exchange-traded funds Teucrium Wheat (WEAT) and Teucrium Corn (CORN), which allow investors to get exposure to grain without going to the futures market.

If there is a cease-fire in the Russia-Ukraine war, grain prices could fall. The U.S. crop this year will still be critical, given low global stockpiles.

There hasn’t been a major harvest shortfall in a decade in the Midwest grain belt, thanks to favorable weather. But if there are scorching temperatures slot gacor hari ini this summer, grain prices—and food generally—could be headed even higher.

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