For Immediate Release
Chicago, IL – June 6, 2012 – Today, Zacks Investment Ideas feature highlights Features: Market Vectors Agribusiness ETF (MOO), Monsanto (MON), Potash Corp. of Saskatchewan (POT), Deere (DE) and PowerShares Global Agriculture Fund (PAGG).
ETFs to Profit from Global Population Boom
As the investors deal with the uncertainty regarding the future of the European Union, slowdown in the emerging markets and doubts regarding the economic recovery in U.S., the markets are expected to continue to be volatile in the coming weeks.
Many investors are selling equities and seeking refuge in “safe” government bonds or cash in order to protect their money. However, with the current yields at their all-time lows, bonds (like cash) will result in loss of capital, when taking the inflation into account. (Read: Buy The Ultimate Commodity With These Water ETFs)
In view of the short-term uncertainty, the investors could consider some sectors that are guaranteed to fetch attractive returns in the long-run.
According to the United Nations, global population will grow from 7 billion to almost 9 billion by 2040 and the number of middle-class consumers will increase by 3 billion over the next 20 years.
As a result, the demand for essential resources will rise sharply. By 2030, we will need 50% more food and 30% more water for the rapidly growing population.
Further, the population living in the urban areas will increase from 3.5 billion in 2010 to 4.9 billion in 2030. As the world becomes more urbanized, there would be greater need for investment in infrastructure services. (Read: Five Emerging Market Infrastructure ETFs For The Coming Boom)
Below we have analyzed three top ETFs that will benefit from the exponentially increasing global need for food, water and infrastructure for the booming population.
Market Vectors Agribusiness ETF (MOO)
For investors seeking to benefit from growing demand for food and resulting increase in food prices, the best option is to invest in the most popular agribusiness ETF MOO.
MOO seeks to track the performance of the DAXglobal Agribusiness Index, which provides exposure to companies that derive at least 50% of their revenues from agricultural business.
This ETF was introduced in August 2007 and has proved to be extremely popular choice for investors in this space, attracting more than $5 billion in assets till date. It has returned a negative 3.5% year-to-date. However looking at the longer term, the fund has rewarded the investors with an attractive 20.2% in 3 years. (Read: The Comprehensive Guide to Consumer Staples ETFs)
The ETF currently holds 49 securities, most of which are large cap (84%) companies. Monsanto (MON), Potash Corp. of Saskatchewan (POT) and Deere (DE) are the top three holdings for the fund. The fund is top-heavy with top ten holdings accounting for 57% of the assets.
In terms of country exposure, U.S. (38%), Canada (14%) and Singapore (11%) occupy the top spots. The fund charges expense ratio of 0.56% annually, making it one of the cheapest choices in this space.
An alternative to MOO is PowerShares Global Agriculture Fund (PAGG), which with AUM of 102 million is much smaller and with an expense ratio of 0.75% is more expensive than MOO.
Another option is DB Agriculture Fund (DBA), which uses futures contracts on some of widely traded agricultural commodities. This fund has $1.8 billion in AUM and charges 0.75% in expenses.
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