Feb 23, 2011 by Scott Garvey

Coulda, woulda, shoulda

It seems there is a lot of good news
concerning agricultural commodity prices these days. According to an
article on Bloomberg.com, world stocks of grains are declining, and
corn stocks are at their lowest point since 1974. The chances of any
grain stock growing significantly after this summer season are
remote, it adds. That should make for a strong market this year.

The article also reports the longrange
forecast is more of the same, with better-than-even odds of food
shortages in some countries. That has me wondering if I should spend
my spare time this summer breaking up the lawn around the house so I
can seed more wheat. Or maybe building a bunker under the barn to
protect me and my food supply from roving bands of starving urbanites
in a kind of post-apocalyptic future is a better idea. That thought,
though, might just be the result of watching too many episodes of The
Colony
on Discovery Channel.

But that same Bloomberg article
suggests if I want to secure a good financial return for the future,
I don’t even need to start my tractor; I can just invest in the
company that built it. It notes some financial analysts are advising
their clients to buy shares in John Deere and AGCO. They see those
high farm commodity prices as a powerful stimulus bound to drive up
the value of machinery company shares, because farmers will have
ample cash to buy new equipment.

Shares in AGCO have been above the $52
mark lately. Those analysts apparently think there is room for yet
more growth and healthy dividends going forward. But even its current
value makes me say coulda, woulda, shoulda.

Why? Well, back in the early 1990s I
started to take some interest in the stock market. I’m not talking
about cow prices; I mean the Bay Street-Wall Street one that had
ruined financiers jumping out of high-rise windows during the crash
of the 1920s.

In the 1990s RRSPs were new, and banks
were pushing clients to buy those that included mutual funds,
introducing average Joes like me to the world of stocks and bonds. So
with interests in agriculture, shiny new machines and the stock
market, that had me following the share prices of big machinery
companies, especially those for the new kid on the block, AGCO. I was
thinking about taking a bold step into the market and needed to find
a good stock pick.

At the time AGCO was a fledgling
corporation absorbing brands that had seen hard times. Its share
price was hovering between $3.50 and $5. And for an novice investor
without a vault full of cash to draw on, that made it doubly
appealing. You could buy a lot of shares for not a lot of money.
Although in hindsight, that didn’t exactly make for sophisticated
selection criteria.

I thought about it for a few weeks, and
kept checking the financial page to keep an eye on prices. When it
came time to make my investment decision, I opted for a new pick-up
truck instead. If I’d bought AGCO shares, I would have made at least
a 1,500 per cent gain on my initial investment in less than 20 years,
excluding dividends. Who feels like jumping out of a window now?

Coulda, woulda, shoulda.

Scott

Scott Garvey

Scott Garvey


Grainews' machinery editor Scott Garvey follows trends and innovation in equipment technology, takes a look at new farm machinery offerings, tracks their performance and goes into the workshop to find better ways to keep them up and running.


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