As the legendary 18th-century banker Baron Rothschild wisely
counseled, "Buy when there's blood in the streets."
Many of the world's best investors do just that. They buy when
everyone else is selling. As a result, they invest in good assets
at a deep discount to their true value.
You've probably heard the negative news headlines about
Argentina. That's because inflation is
running at 10% per year (unofficially numbers are closer to 20%).
Meanwhile, the national currency is sinking against the dollar.
Stock prices are plunging, and the government is threatening to
default on its debt.
I've been telling
readers about the dire situation in Argentina. And in July, I
wrote an article titled
Why I'm Buying Argentina Farmland.
My article painted a dire picture. With uncertainty and
risk-aversion running rampant, Argentine stock prices were
severely depressed. That's why it was a perfect time to consider
One of my favorites was an Argentinian farming company. Here's
what I wrote in Daily Profit a few months ago:
This company happens to be Argentina's largest farmland
owner, with over 400,000 hectares spread across 34 farms.
Sixty-six percent of these hectares are in Argentina; the rest
are spread among Brazil, Paraguay and Bolivia. These farms
produce a variety of agriculture products - soybeans,
sugarcane, corn, wheat, sunflowers, dairy, and beef
Thanks to [Argentina President] Ms. Kirchner, and her
depressing influencing on Argentina's financial markets, this
farmland company is also dirt-cheap. Its low share price has
driven the yield up to 6% and the discount-to-book value to
The company I recommended was
Cresud SA (
When my article was published on July 26, the stock traded at
Cresud is a well-run company with motivated management: the
CEO owns 37% of the outstanding shares. It's been around for 75
years; it has plenty of experience traversing Argentina's
This summer, the shares were temporarily depressed. But its
long-term potential was bright. That's because global
demographics point to a very favorable outlook for farmland.
The United Nations estimates world population will reach 9.1
billion by 2050, an increase of 34%. Most of the growth will
occur in the developing world, and within the major metropolitan
regions. This means a greater percentage of the world will be
dependent on purchased food.
On the supply side, roughly 37% of world's land is used for
agricultural. But just 11% is used to grow crops. The potential
to expand agricultural land use is limited due to infrastructure
constraints, water availability, crop suitability and competition
from other land uses.
Greater demand and limited new supply create an environment
for rising farmland values.
But because of the off-putting events occurring in Argentina
in July, Cresud shares had been hammered down and were trading at
a ridiculous 40% discount to book value. I saw a screaming
bargain, and I was literally aggressively recommending my
High Yield Wealth
subscribers to buy Cresud shares.
Investors who followed my advice are sitting on sizable gains,
with Cresud shares up 53% in the past four months. Most of the
gain has materialized over the past three weeks.
Cresud Shares Soar 53%
Cresud offers an invaluable investing lesson.
If you are confident and experienced, buying Cresud shares
during the July turmoil was an easy decision. Experience would
have alerted you to the pessimism that was depressing stock
Four months later, we see that Argentina's stock market is up
35%; the peso is stabilizing; the government has avoided default;
the political environment is improving.
To be a successful contrarian investor, you must rationally
visualize a future different from today. Most investors lack this
capability. They believe tomorrow must be like today. And this
perception ensures they will continually miss out on enticing
value opportunities like Cresud SA.
Even after rising dramatically, Cresud offers investors an
attractive 4.1% dividend yield. This stock is a solid long-term
investment, and one that I continue to recommend.