Monday, March 9, 2009

Jim Rogers Still Bullish on Commidities

Not this this is surprising, but Jim Rogers is still bullish on commodities. In an economy where the prices of most assets in decline, the most predictable products would be hard assets.

Rogers added he remains bullish on agriculture and that commodities are “the only area of the world economy I know which is benefiting.” He said he owns “some” gold and silver, and regards silver as “cheaper.”

Water, power and other infrastructure companies’ shares are favored because their earnings are less vulnerable during the global slowdown, Rogers said.

“We’re having a shift to people who produce real goods,” Rogers said. “Those are the people who are going to be in charge. The farmers are going to have the Lamborghinis in the future, not the brokers on Wall Street.”

As someone who spends a lot of time researching investment ideas, believe me that there isn't a lot out there that's attractive right now. A case can be made for earnings to be eroded in almost any sector. Companies guiding higher and raising dividends are almost non-existent. One company, which is in the agriculture sector is Monsanto (MON). They continue to say they're performing well, but you'll pay a premium for the stock at 17x earnings. Why should we pay a premium for any stock in an environment with this much uncertainty? Just because there is nowhere else to put our money? No thanks.

I do like the sector, but it doesn't mean I'm willing to overpay for the stocks. I like Potash (POT) and Mosaic (MOS) basically as much as Monsanto, and I'm looking to create a position in any of these stocks at the right price.

I do believe inflation is coming. I'm in favor of owning inflation protected securities, as well as a various basket of commodities, including agriculture and oil.

Bloomberg article link.
Disclosure: none.

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