GRAINCORP
While shares in Australia have tumbled in the new year, one sector is holding up well. That is "soft commodities", the agricultural products that are in increasing demand. In Australia, farmers have seen a sudden lift in their prospects.
Grain markets are seeing record prices and
the La Nina rains have increased production. Graincorp shares have soared after the company said it expected to exceed its grain receival forecast by one million tonnes to four to five million tonnes.
In general, agricultural stocks are attracting a lot of investor attention because the "big picture" favours them.
There is a growing demand for food and other soft commodities, driven by the huge populations of China and India where the middle classes are finding a new level of affluence. That is creating more sophisticated eating habits and demand for new types of food.
GPG
Guinness Peat Group shares have plummeted since late last year.
The fall increased when the general market started tumbling in the new year but, clearly, there were doubts about this stock several months before that.
The company is hard to analyse as profits are non-recurring and lumpy.
Nevertheless, GPG has perfected a formula that has added value for shareholders for many years. It makes large investments in mainly listed companies, takes its place on the board and starts influencing the investment, often by making tough decisions that impact the "big picture". Most analysts believe GPG should be valued on its net tangible asset value (NAV), rather than on the basis of earnings and cash flow, given the nature of the company is to increase asset and shareholders' value. On the basis of its NAV, GPG shares are trading at a deep discount.
