Get This Last Rebound Opportunity Before It Disappears

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When the market hit new lows in March, it was understandably hard for investors to pull the trigger. They knew they'd be buying into an investment landscape rife with risk.

Hindsight is 20/20. Just six months later, investors can see the returns they might have captured had they taken the plunge. The S&P 500 has rebounded +57.4% since early March. In fact, a slew of sectors and markets have had +50%-plus gains since then.

The table below shows just a sample of gains offered up by the rebound. Sector Security (Ticker) Gain AgricultureiPath DJ AIG Agriculture Total Return Fund ( JJA ) +21.3% OiliPath S&P GSCI Crude Oil ( OIL ) +50.2% CopperiPath DJ AIG Copper ( JJC ) +76.9% Real EstateiShares DJ US Real Estate ( IYR ) +90.5% Emerging MarketsiShares MSCI Emerging Markets
( EEM ) +92.8% SteelMarket Vectors Steel ( SLX ) +141.7%
For many, it seems like a missed opportunity. So many sectors have come so far, so fast. It's hard to imagine they have much run left in them.

But it's not too late. There is still one sector left to bounce.

Agriculture prices haven't rebounded like the prices of other commodities. In fact, the performance of the Dow Jones AIG Agriculture Index has lagged the S&P's gains by more than half. Better yet, fertilizer prices are only now reaching their lows.

When crop prices fell and credit tightened, farmers cut back on fertilizer purchases. Wholesalers, in turn, cut back on their inventories. Even when fertilizer prices started to fall, buyers still stalled, hoping to catch a better deal. Exports of the fertilizer potash were down -72% in the first half of the year.

But the fertilizer stalemate is about to end.

The effects of continued under-application of fertilizer is already starting to reverberate throughout the world -- especially in China. China is traditionally a large potash importer. But like everyone else, China curtailed their fertilizer imports during the past six to nine months.

Crop yields in China have been suffering due to insufficient fertilizer use and domestic prices for grains and vegetables have risen. What's more, China's economy is not in recession; its GDP grew at an enviable +8.9% last quarter. This fast-growing economy is creating an even larger demand for food.

Crop prices are rising. There is pent up demand for fertilizer. Together, these trends should boost the agriculture sector into rebound territory. There are a number of ways investors can catch the bounce.

One way to capture the gains from rising crop prices is by investing in an ETF that tracks the Dow Jones AIG Agriculture Index. For instance, the iPath DJ AIG Agriculture Total Return Sub-Index Fund ( JJA ) tracks the futures contracts of seven agriculture commodities: soybeans, corn, wheat, cotton, soybean oil, coffee and sugar.

Agrium ( AGU ) is a direct fertilizer play. The Canadian fertilizer company just issued an earnings warning, saying its third-quarter profits could be 90-95% below last year's same-period earnings. Personally, I like buying after a company has lowered expectations -- especially when I feel there is more upside than downside.

Another avenue is investing in a company like Syngenta AG ( SYT ) . This Swiss company develops high-yielding, disease-resistant seeds and also markets herbicides.

While agriculture has missed much of the rally, it now appears to be poised to catch up. And there is no shortage of ways for investors follow along for what could be this market's final rebound play.


Amy Calistri

Editor: Stock of the Month

P.S. There's one diversified agriculture play that I especially like. I profiled it just a couple of months ago in my Stock of the Month newsletter. It's already up +5.6%, but I'm convinced it's going to be another one of my double-digit gainers. If you'd like to learn more about this investment, and my Stock of the Month newsletter, click here.

Disclosure: Amy Calistri does not own shares of any security mentioned in this article.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

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This article appears in: Investing , Commodities , Stocks


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