Portfolio Manager Perspectives

Jeff Benjamin

Two ways to play the growing middle class: Philip Tasho

Monsanto and Agco are two stocks that could benefit from the purchasing power of the expanding economic mainstream

Feb 14, 2011 @ 1:49 pm

By Jeff Benjamin

Agricultural commodities represents a creative way to invest in the world’s emerging middle class, according to Philip Tasho, founder and chief investment officer at Tamro Capital Partners, which manages $1.4 billion in asset management.

Specifically, Mr. Tasho is focused on the seed, nutrient and equipment subcategories of the soft commodities sector.

In applying a bottom-up investment strategy that looks for solid, attractively valued companies, Mr. Tasho favors seed producer Monsanto Co. Ticker:(MON).

“This is a leading company in this space,” he said. “As the middle class continues to emerge in many of the developing countries, there will be more demand for agriculture.”

Monsanto, which has a $40 billion market cap, fell out of Wall Street’s favor a few years ago when it lost a major herbicide patent. But it’s run almost like a biotechnology company, in terms of its development pipeline, according to Tamro portfolio manager Tim Holland.

“The future and real economic value of Monsanto is in the seed technology,” Mr. Holland said. “As people around the world eat more protein, there will be tremendous pressure on grain supply.”

In the nutrient group, Mosaic Co. Ticker:(MOS) stands out as leading producer of phosphates and potash used to fertilize soil.

“People have got to eat,” said Mr. Tasho. “That’s why we see this as a long-term secular trend that is outside the ebbs and flows of the overall economic cycle.”

In terms of agricultural equipment, Mr. Holland said the obvious choice of Deere & Co. Ticker:(DE) is already too expensive.

“As much as we like Deere, the price you pay dictates your return,” he said.

However, he added, Agco Corp. Ticker:(AGCO) is a stock in the space that still is attractively priced and is “under the radar screen because people tend to automatically think of Deere when it comes to equipment companies.”

Mr. Holland, who manages the Aston/Tamro Diversified Equity Fund Ticker:(ATLVX), described Agco as “the largest pure-play agriculture equipment company in the world.”

Portfolio Manager Perspectives are regular interviews with some of the most respected and influential fund managers in the investment industry. For more information, please visit InvestmentNews.com/pmperspectives.


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