Cresud: Buying Into Argentina Agriculture

Scanning the charts early Monday morning, I zeroed in on a long candidate stock. You might think I’m crazy in a stock market like this to go long right now, but there are growth stories around the world to buy into. It’s a company headquartered in Argentina, and they’re involved in one of my favorite sectors right now, agriculture, and food production.

Long Position Cresud SA. (CRESY)

• Friday August 1 Closing Price: 13.30
• Buy at current prices or down to 12.83 – 12.42
• Stop-loss 8% or less in a market like this.

Note: If 12.42 gives way, prices could possibly drop to about 10.12 to 9.80, so stick to your stop-loss price whatever amount it is.

Take Profit Areas

• Short Term: 14.85
• Intermediate Term: 16.98
• Long Term: 20.80
• Longer Term: 23.38

CRESY Basic Fundamentals

Cresud earnings estimates are 0.60 for 2008, and 0.81 for 2009. Its got a dividend yield of .62, and, what I like the most in a time of ill-liquidity, its total debt to equity is only 10.82%.

CRESY Competitors

Cresud major competitors are agriculture giant Archer Daniels Midland (ADM), and other agri players like Cargill and DeWied International. With global food demand forecasted to be strong for at least the next five years, and current food crises worldwide, the current agriculture companies should do pretty well intermediate to long term.

CRESY Company Profile (from Reuters.com)

Cresud Inc., incorporated on December 31, 1936, is an Argentine-based agricultural company. The Company is involved in a range of activities, including crop production, cattle raising and milk production. As of June 30, 2007, the Company owned 17 farms with approximately 449,991 hectares. Approximately 21,704 hectares of the land it owns are used for crop production, approximately 84,889 hectares are for beef cattle production, 2,609 hectares are for milk production and approximately 10,961 hectares are leased to third parties for crop and beef cattle production. The remaining 329,828 hectares of land reserve are primarily natural woodlands. During the fiscal year ended June 30, 2007 (fiscal 2007), the Company leased 25,307 hectares from third parties for crop production and 29,208 hectares for beef cattle production.

The Company is indirectly engaged in the Argentine real estate business through its holding of 34.4% interest in Inversiones y Representaciones Sociedad Anonima [IRSA], which is a real estate company. IRSA is engaged in a range of diversified real estate activities, including residential properties, office buildings, shopping centers and luxury hotels in Argentina.

Crop Production

The Company’s agriculture production is mainly based on crops and oilseeds. Its crop production includes mainly wheat, corn, soybean and sunflower. Other crops, as sorghum, are sown occasionally and only represent a small percentage of total sown land. As of June 30, 2007, the Company’s crop stocks consisted 6,705 tons of wheat, 34,172 tons of corn, 27,890 tons of soybean, 2,203 tons of sorghum and 3,580 tons of sunflower.

Beef Cattle Production

The Company’s beef cattle production involves the breeding and fattening of its own animals. The Company also purchases and fattens cattle, which it sells to slaughterhouses and supermarkets. As of June 2007, the Company’s beef cattle aggregated 83,727 heads, and it had a total surface area of 84,848 hectares dedicated to this business activity.

Milk Production

The Company conducts its milk business in three dairy facilities in two farms, La Juanita and El Tigre. During fiscal 2007, the Company had a total capacity of 3,300 cows in milking per day.

Recent Cresud News

June 11, 2008. Cresud announced that it has acquired an additional 3% investment stake in Brasilagro Compania Brasileira de Propiedades Agricolas. Cresud now holds about 14% of the company stock in Brasilagro Compania Brasileira de Propiedades Agricolas.

Disclosure: Author holds a long position in CRESY

Comments

[Etoile Bril...:]

Like the fundamentals but find it difficult to ignore the event risk this stock has in terms of political interference. Argentinia seems to be getting back to its bad old ways, while Brazil is romping ahead.

2008 Aug 05 04:26 AM

[CLH:]

Yes Etoile, Argentinia has been a disaster for almost 70 years because of their love of socialism. One of the richest lands in the world, but they have never accomlished anything.

I owned CRESY at one time but gave up.

2008 Aug 05 02:42 PM

[veryold:]

I lost money two times on this stock.

2008 Aug 05 02:59 PM

[spadice:]

An excellent agricultural company with a good proposition.
No exportcharges in the near future.
I like the stock and recently add on new lows. If robust investors awake it will soon reach the $ 30,00 level.

2008 Aug 05 05:37 PM

[footchester:]

I recently doubled up when the price came back down. No one has mentioned that current earnings are less important than usual here. This is primarily a land play; they have tens of thousands of acres of the world's finest land on their books at insanely undervalued prices. The real money will be made when China's first trillionaire offers to buy them out at a hefty premium to then -current market prices.

2008 Aug 05 06:59 PM

[Traveling T...:]

Have you been following the farmer protests in Argentina? I know that the farmers successfully fended off a 40% sliding scale tax last month, but the fight with Kirchner is not over. I would be careful.

2008 Aug 05 10:49 PM

[Michael Mic...:]

Event risk of CRESY with the Argentina political and farmers protests is a serious factor to consider here. The land holdings they hold are significant but may not mean much near intermediate term, or even long-term if the event risk unfolds and gets worse. There's is real value in CRESY right now, if the event risk does not get worse. Long and intermediate term CRESY is showing ending 5th waves on the downtrend. If all goes right here, upside could be coming soon. In case it doesn't and your long at current levels, make sure to stick to your stop-loss price. See above for our recommend stop-loss and note if the CRESY price keeps heading south.

Good day and good investing trading.

www.invest2success.com

2008 Aug 06 02:23 AM

[Egg:]

Best (and only) advice I think that one can give for CRESY is to buy and put away...and hope for a capitalist revolution one day in Argentina.

2008 Aug 06 02:45 AM

[Egg:]

BTW....Whatever you do, do NOT put in a stop loss on CRESY. This stock is so lightly traded, that if it gets to within 3-4% of your stop loss, it very likely will be priced down just on a spike to steal your shares.

Use a mental stop loss, if you must, and just watch daily.

2008 Aug 06 02:48 AM

[Michael Mic...:]

Got stopped out on CRESY. Would get interested in buying back possibly at the 10.12 to 9.80 price areas. www.invest2success.com

2008 Aug 20 02:06 AM