I recently wrote a couple of articles (you can find them here and here) providing 10 tips to young investors who are preparing for retirement. While I won’t go into the details here, two tips in particular that I provide include:
- Buy assets that will perform well over the long run.
- Invest in assets that are in secular uptrends.
If you isolate long-term opportunities that will perform well even if the economy is weak, then you will have more confidence in buying such assets on weakness.
I think one such opportunity that makes a lot of sense for young investors looking for stocks to hold for many years and even for decades is agriculture. Investments in agriculture are extremely simple to justify without the esoteric knowledge required to successfully pick stocks in many other sectors (e.g. biotechnology, information technology, additive manufacturing or “3-D printing.”)
The global population is growing and people need to eat. Companies that contribute to food production in a way that generates value are going to be profitable. If this isn’t the case then these companies will lose money, go bankrupt, and food production will decline. This would lead to mass-scale starvation. While the latter scenario is possible, it is extremely unlikely, and if it were to play out then we would have bigger problems than losing money on our investments.
Since agriculture will almost certainly be a profitable endeavor going forward, I think there is good reason to include shares of agriculture companies in your portfolio. But which ones? The companies that are the most likely to be among the best performing in the agriculture space are those that are going to be supplying the market with products that improve efficiencies. These companies can either aid in decreasing the cost of farming (i.e. increase margins), or they can aid in increasing crop yields (i.e. increase sales.) Let’s look at one of each.