I'm pretty happy with the calls I made on South American agriculture companies back in July of this year. As I discussed yesterday, Adecoagro (AGRO) is up nearly 20% from my Alpha-Rich call, while BrasilAgro (LND), my least favorite of the four, is down more than 10%. SLC Agricola (OTCPK:SLCJY) has been something of a disappointment, up only about 5%, but my high-risk/high-reward call Cresud (CRESY) laps the field with a better than 40% return from my initial recommendation.
Cresud
is in a tricky spot. On one hand, the end may well be in sight for the
Kirchner brand of Peronism and that should be good for Argentina's
economy. On the other hand, Argentina's economic history generally
suggests that a change in government is more of a distinction without a
difference. Elsewhere, I believe Cresud's land values are likely
understated and that the company is unlikely to see the same bad weather
that has hurt yields in recent yields, but farming is inherently
unpredictable and the problems in Argentina are restricting the
company's growth and value-creation potential.
On balance, Cresud
is still undervalued. Its undervaluation is roughly on par with that of
Adecoagro, and choosing between the two seems to me to be more a matter
of whether you prefer larger upside or smaller downside.
Read more here:
Better Times, Worse Times For Cresud
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