Commodities & Metals

Agriculture ETF Wars: Commodity ETF Beats Stock ETF (MOO, DBA, TITN)

Investors seem to not be able to get enough when it comes to investing in agriculture now.  This used to be a dead boring sector but it’s now the top performer with earnings visibility and with raised earnings expectations soaring.  Last year we saw an agriculture ETF get launched via the Market Vectors Global Agribusiness ETF (AMEX: MOO).  This has seen a monster gain with the ETF being up almost 50% at one point since coming public last September.

What is interesting is that ETF’s often get duplicated or see similar ETF launches.  As it turns out, the “MOO” ETF was the “other” ETF.  The PowerShares DB Agriculture Fund (AMEX: DBA) has actually been around longer, although it is a commodity ETF rather than ETF full of stocks that stand to benefit from agriculture trends.  The “DBA” has also outperformed the “MOO” by quite a margin. It’s even more actively traded.  The DBA” tracks the Deutsche Bank Liquid Commodity Index- Optimum Yield Agriculture Excess Return, which is composed of futures contracts on some of the most liquid and widely traded agricultural commodities like corn, wheat, soy beans and sugar.

The “MOO” is up from its $41.30 first trade to $55.10 on today’s close, which is up more than 33%.   The “DBA” is up from its $26.72 open the same day to $41.99, which is a 57.1% gain.  That’s about the same gain as a year ago too. 

Jim Cramer recently gave his big picks to benefit from rising commodity prices.  This is always a bit of a stump when one ETF in the same group does so much better than its rival.  After all, these are deemed the new mutual funds.  But the gains in many of the commodities have been what has helped the actual stocks inside the “MOO.”

When you look over the best IPO’s of recent months, the best or second best so far is Titan Machinery Inc. (NASDAQ: TITN) with roughly a 100% gain from its $8.50 IPO price from early in December.  There was a recent hot-sounding IPO filed and there was also spin-off IPO that is coming down the pipe in the agriculture sector, and that may create more buzz around a sector that has been hotter than most would have guessed. 

Trends can continue beyond what the doubters would ever guess.  Just always remember that after a huge run up like this, nothing lasts forever.  Caveat Emptor.

Jon C. Ogg
March 12, 2008