Forget complex derivative strategies. The smart money is taking a more simplistic investing approach to combat anticipated hyperinflation. So what's the latest fund fad? It's farmland.
Gold with a yield
Farmland flourishes in periods of high inflation. Historically, the value of farmland has a 90 to 95% correlation with inflation. In addition, farmland yields a crop, which increases in value as the dollar decreases in value.
And a decrease in the value of the dollar is well under way. The Consumer Price Index pegs inflation at around 1.5%, but many bright financial minds claim inflation is closer to 6% or 7%, with the worst yet to come. As a result, many institutional investors are plowing money into farmland.
BlackRock (NYS: BLK) has taken a multi-million dollar position in farmland. And one hedge fund claims to be one of the largest arable landholders in the country.
So how does the ordinary investor without access to billions of dollars capitalize on the flight to farmland? Agriculture stocks are a good place to start.
PotashCorp (NYS: POT) and Mosaic (NYS: MOS) stand to benefit from the farming boom as demand for fertilizer increases. CEO Bill Doyle is so confident in the future of farming that he helped fend off a takeover bid in which he stood to pocket over $400 million for his portion of PotashCorp.
Also be on the lookout for farmland REITs. Gladstone Investment Corporation (NAS: GAIN) is set to launch the first publicly traded farmland REIT named Gladstone Land. Gladstone Land owns six commodity-producing farms in California. Other funds are expected to follow as investors clamor for exposure to farmland.
The bottom line
The smart money is betting big on farmland as inflation concerns mount. Now's the time to consider following the smart money by adding some agriculture to your portfolio.
At the time thisarticle was published Fool contributor Adam J. Crawford does not own shares in any company mentioned in this article. Motley Fool newsletter services have recommended buying shares of BlackRock. Motley Fool newsletter services have recommended creating a synthetic long position in Monsanto. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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