Americans are paying more for food and fuel this year. A lot more. New government data for March indicates a 45.8% rise in motor fuel and a 23.3% rise in fruits and vegetables. Meats, poultry, fish and eggs were 13% more expensive than their prices at the start of the year. According to Friday’s Labor Department report, the consumer price index rose 0.5% last month while the core rate fell by 0.1%.
For the most part rising consumer spending indicates economic improvement, but the escalating price of necessities means there’s less money to spend elsewhere and support small businesses. The sale of personal computers and related equipment fell by 14.3 percent while children’s apparel slid 12.7 percent.
While most Americans will be losing money at the pump and at the grocery store, investors have an opportunity to profit from the direction of spending.
The inflation in food, as well as the strain being placed on supply from demand fueled by emerging nations like China and India are making agricultural ETFs a buy. The profits from the ETFs in agriculture may just help investors pay for the pricier food and gas.
Among the Agricultural ETFs and ETNs or as follows
iPath Dow Jones AIG-Agriculture ETN (NYSE: JJN)– This particular ETN has diverse holdings, 7 to be exact, spread across commodities. The breakdown, 31% in soybeans, 20% in wheat and 16% in corn and rest in cotton sugar, coffee and soybean oil. During the close to four years since it began operation, the ETN is up 28%. If the price of food keeps rising, so will the profits for this ETN.
ELEMENTS Linked to the Rogers International Commodity Index – Agriculture ETN (NYSE: RJA)-Elements represents 20 different agricultural commodities. Investors who don’t want to put all their eggs in one basket, or 31% of their eggs in soybeans may consider this ETN. Wheat is the largest holding here at 30% with 14% in corn, 12% in cotton and other holdings across agricultural commodities. The diversification makes this a more conservative buy. Investors who want to put more weight in grain, which is expected to rise alongside the demand for more meat based diets in China (grain is used to feed livestock) should consider ELEMENTS Linked to the MLCX Grains Index ETN (NYSE: GRU) -which is considerably less diverse with wheat accounting for 47% of the holdings and corn right beneath it with 36%,
For investors looking to profit directly from the greater demand from livestock they should consider E-Tracs UBS Bloomberg CMCI Food (NYSE: FUD) which has been making significant returns.
For those who are more sold by the visible push in gas prices at the pump and looking to profit from skyrocketing energy costs there remain a number of avenues to pursue. Energy took a major hit recently and while it may reach levels as the high prices pushed down demand but it has the potential to go back up again on a longer timeline. Seeking alpha recently put together a list of undervalued small oil and gas companies that are being hyped up by banks right now as bargain bins
Among them is Stone Energy (NYSE: SGY), an independent oil and natural gas company engaged in the acquisition, exploration, exploitation, development and operation of oil and gas properties in the Gulf of Mexico. Shares fell alongside the rest of the energy sector but may be on their way back up alongside more pressure to drill domestically.
ATP Oil & Gas Corporation (NYSE: ATPG) has a similar appeal, operating in the continental shelf on the Gulf of Mexico. The company is valued at $940,000 and rose last week after recieievnig a second deep-water permit that facilitates the competition of its second well on one of its blocks. It’s currently trading at $16.68.
For a full list of undervalues gas companies read the seekingalpha article.
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