Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Gold/SPX Ratio and the Gold Stock Case - 18th Jan 21
More Stock Market Speculative Signs, Energy Rebound, Commodities Breakout - 18th Jan 21
Higher Yields Hit Gold Price, But for How Long? - 18th Jan 21
Some Basic Facts About Forex Trading - 18th Jan 21
Custom Build PC 2021 - Ryzen 5950x, RTX 3080, 64gb DDR4 Specs - Scan Computers 3SX Order Day 11 - 17th Jan 21
UK Car MOT Covid-19 Lockdown Extension 2021 - 17th Jan 21
Why Nvidia Is My “Slam Dunk” Stock Investment for the Decade - 16th Jan 21
Three Financial Markets Price Drivers in a Globalized World - 16th Jan 21
Sheffield Turns Coronavirus Tide, Covid-19 Infections Half Rest of England, implies Fast Pandemic Recovery - 16th Jan 21
Covid and Democrat Blue Wave Beats Gold - 15th Jan 21
On Regime Change, Reputations, the Markets, and Gold and Silver - 15th Jan 21
US Coronavirus Pandemic Final Catastrophe 2021 - 15th Jan 21
The World’s Next Great Onshore Oil Discovery Could Be Here - 15th Jan 21
UK Coronavirus Final Pandemic Catastrophe 2021 - 14th Jan 21
Here's Why Blind Contrarianism Investing Failed in 2020 - 14th Jan 21
US Yield Curve Relentlessly Steepens, Whilst Gold Price Builds a Handle - 14th Jan 21
NEW UK MOT Extensions or has my Car Plate Been Cloned? - 14th Jan 21
How to Save Money While Decorating Your First House - 14th Jan 21
Car Number Plate Cloned Detective Work - PY16 JXV - 14th Jan 21
Big Oil Missed This, Now It Could Be Worth Billions - 14th Jan 21
Are you a Forex trader who needs a bank account? We have the solution! - 14th Jan 21
Finetero Review – Accurate and Efficient Stock Trading Services? - 14th Jan 21
Gold Price Big Picture Trend Forecast 2021 - 13th Jan 21
Are Covid Lockdowns Bullish or Bearish for Stocks? FTSE 100 in Focus - 13th Jan 21
CONgress "Insurrection" Is Just the Latest False Flag Event from the Globalists - 13th Jan 21
Reflation Trade Heating Up - 13th Jan 21
The Most Important Oil Find Of The Next Decade Could Be Here - 13th Jan 21
Work From Home £10,000 Office Tour – Workspace + Desk Setup 2021 Top Tips - 12th Jan 21
Collect a Bitcoin Dividend Without Owning the King of Cryptos - 12th Jan 21
The BAN Hotlist trade setups show incredible success at the start of 2021, learn how you can too! - 12th Jan 21
Stocks, Bitcoin, Gold – How Much Are They Worth? - 12th Jan 21
SPX Short-term Top Imminent - 12th Jan 21
Is This The Most Exciting Oil Play Of 2021? - 12th Jan 21
Why 2021 Will Be the Year Self-Driving Cars Go Mainstream - 11th Jan 21
Gold Began 2021 With a Bang, Only to Plunge - 11th Jan 21
How to Test Your GPU Temperatures - Running Too Hot - GTX 1650 - Overclockers UK - 11th Jan 21
Life Lesson - The Early Bird Catches the Worm - 11th Jan 21
Precious Metals rally early in 2021 - 11th Jan 21
The Most Exciting Oil Stock For 2021 - 11th Jan 21
Financial Market Forecasts 2021: Navigation in Uncharted Waters - 10th Jan 21
An Urgent Message to All Conservatives, Right-Wingers and Patriots - 10th Jan 21
Despite Signs to the Contrary, Gold Price at or Near Top - 10th Jan 21 -
Ultimate Guide On The 6 Basic Types Of Index Funds - 10th Jan 21
Getting Vaccinated at TESCO - Covid-19 Vaccinations at UK Supermarket Pharmacies and Chemists - 10th Jan 21
Cheers for the 2021 Stock Market and These "Great Expectations" - 9th Jan 21
How to Plan Your Child With Better Education - 9th Jan 21
How To Find The Best Casino - 9th Jan 21
Gold Is Still a Bargain Buy - 8th Jan 20
Gold Price Set to Soar as Hyperinflation Looms - 8th Jan 21
Have Big Dreams? Here's How to Pay for Them - 8th Jan 21
Will the Fed Support Gold Prices in 2021? - 8th Jan 21
Stocks trading strategies for beginners - 8th Jan 21
Who is Buying and Selling Stocks in 2021 - 8th Jan 21
Clap for NHS Heroes 2021 as Incompetent Government Loses Control of Virus Again! - 8th Jan 21

Market Oracle FREE Newsletter

FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

Merger Frenzy and Food Riots Emerging Investment Themes

Stock-Markets / Investing 2010 Sep 24, 2010 - 01:56 AM GMT

By: Joseph_Dancy

Stock-Markets

Best Financial Markets Analysis ArticleTwo investment themes have emerged over the last few months that are very positive for our portfolio. First, merger and acquisition activity has increased substantially. Secondly, the price of many agricultural commodities have increased and U.S. exports are booming – all very positive for the agricultural sector.


Mergers - With regard to merger and acquisitions , we think the acquisition landscape is as promising as we have seen in the 11 year history of our portfolio based on: (1) attractive market valuations, (2) impressive company growth rates, (3) good business niches, (4) multiple financing options, and (5) the slow growth status of the global economy. MarketWatch published a column last month that noted as follows:

McKinsey & Co . . . in a report in July called "A singular moment for merger value?", the consultancy said the scene was set for not "just another turn in the acquisition cycle", but that "the landscape for strategic acquirers hasn't looked this promising for decades". That's right, decades.

The wave of merger activity in the energy, agriculture, technology, banking, and other sectors might set records in 2010 according to the Wall Street Journal and Financial Times—a development that would be very positive for the markets and our portfolio.

In a slow growth economy one way to expand is to buy growth by acquiring firms that are publicly traded and have a good business niche, especially when many such companies are grossly undervalued. In some of the large company acquisitions we saw last month the ’premium’ has been 25% to 70% over market rates—and the premiums may be pushed higher if alternative bidders emerge.

Note that merger and acquisition activity in the U.S. oil and gas sector reached its highest level in more than two years during the second quarter. The U.S. oil and gas sector saw a total of 142 announced deals in the second quarter, the highest volume for deals seen since before the recession began. Total value for the second quarter of 2010 amounted to $36.9 billion compared with $13.7 billion in the second quarter a year ago, representing a 169% increase year over year. More than 25% of the LSGI Fund portfolio is invested in the oil and gas sector – so the acquisition activity is positive for sector valuations.

Also, note that merger and acquisition deal activity in the global industrial manufacturing industry showed marked improvement from the first quarter of 2010. In the second quarter of 2010 there were 33 announced deals worth $50 million or more, which is more than double the 14 deals announced in the first quarter. And, deal value totaled $8.5 billion, more than triple the $2.3 billion in value announced in the first quarter.

Agricultural Sector – Last month several analysts and firms noted that sugar prices were skyrocketing. Cattle prices on the futures exchanges also moved upward to levels not seen in a couple years. Demand helped ‘trigger stampede in cattle prices’ according to one article. In Chicago the contract for pork bellies also set record.

Wheat prices have jumped 45% so far this year after Russia suffered a major crop failure and banned exports. And last month Russia announced they were extending the ban on wheat exports for 12 more months, which kept grain prices firm. Concern over the lack of soil moisture has the Russian government concerned over the viability of the winter wheat crop to be harvested next spring. (Charts courtesy Financial Times and Wall Street Journal)

Cotton prices are nearing the highest price level they have seen since 1995 as rising demand in emerging markets continues. Inventories are the tightest in 13 years. The U.S. is the largest exporter of cotton, and shipments this year are off to their fastest start since 1993 as apparel demand in China, the biggest consumer, increased 24 percent. Cotton may advance further before new supplies are harvested in October.

The United Nations called a special meeting to address the increase in food prices late last month after the first food riots since 2008 broke out in Mozambique. The share of income spend on food is much higher in most countries than in the U.S. (see chart), and food price increases can impact political and social stability. China also adopted policies last month to moderate food inflation and increase food production.

Farm incomes across the U.S. and Canada will jump substantially this year. Last month the U.S.D.A. revised their farm income estimates for 2010. Net U.S. farm income will increase to $771 billion in 2010, up 24% from 2009 and $12.3 billion above the 10 year average. Cash receipts are expected to increase 6.5%, due mainly to higher livestock receipts. Higher grain prices are also driving income gains, as well as moderate energy and fertilizer prices.

Investment implications – The merger trend is moving in a direction we think will support stock prices, especially for small and economically viable firms that are undervalued and growing.

Market strategist Donald Coxe noted in a conference call last month that “agriculture in the U.S. is in dramatically better shape than a few months ago.” The recent weather driven developments are ‘wonderful news’ for investors in the agricultural sector, especially the agricultural equipment manufacturing and sales sector. Weather may continue to be the subject of bad news into the fall according to Coxe, which may focus investor interest on companies in the sector.

If Coxe is on point on this analysis, and we think he is, this is positive news for the agricultural sector holdings.

By Joseph Dancy,
Adjunct Professor: Oil & Gas Law, SMU School of Law
Advisor, LSGI Market Letter

http://www.lsgifund.com

Email: jdancy@REMOVEsmu.edu

Copyright © 2010 Joseph Dancy - All Rights Reserved

Joseph R. Dancy, is manager of the LSGI Technology Venture Fund LP, a private mutual fund for SEC accredited investors formed to focus on the most inefficient part of the equity market. The goal of the LSGI Fund is to utilize applied financial theory to substantially outperform all the major market indexes over time.

He is a Trustee on the Michigan Tech Foundation, and is on the Finance Committee which oversees the management of that institutions endowment funds. He is also employed as an Adjunct Professor of Law by Southern Methodist University School of Law in Dallas, Texas, teaching Oil & Gas Law, Oil & Gas Environmental Law, and Environmental Law, and coaches ice hockey in the Junior Dallas Stars organization.

He has a B.S. in Metallurgical Engineering from Michigan Technological University, a MBA from the University of Michigan, and a J.D. from Oklahoma City University School of Law. Oklahoma City University named him and his wife as Distinguished Alumni.

Joseph Dancy Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules