2 Agriculture Stocks Ready For Bountiful Returns

The market rally is looking very long in the tooth. The GDP report came in light Friday, at 2.8%, most of which was attributable to inventory build. This probably means that this growth will be the high point for domestic GDP for a while. Given this and the ongoing issues in Europe, I am cutting back on my long positions and looking for opportunities to short highfliers when the time comes. One area I am still considering for new investment is the Agriculture sector. Myriad stocks still have low valuations and will benefit from the secular increase in demand for food in the developing world. Here are two stocks I like at these price levels.

Bunge Limited (BG) - "Bunge Limited engages in the agriculture and food businesses worldwide. Its Agribusiness segment principally involves in the purchase, storage, transport, processing, and sale of agricultural commodities and commodity products, including oilseeds and grains, primarily soybeans, rapeseed or canola, sunflower seed, wheat, and corn". (Business Description from Yahoo Finance)

4 reasons BG is a solid buy at under $58 a share:

• The mean analysts' price target is over $73 on Bunge. Credit Suisse has an "outperform" rating and a $72 price target on BG.
• The stock looks like it is bottoming at current levels (See Chart).

• Bunge is selling at the very bottom of its historical valuation range based on his P/S, P/B and P/CF.
• Bunge is selling at less than book value, has a five year projected PEG of under 1 (.98) and a forward PE of less than 9. It also yields 1.7%.

Smithfield Foods (SFD) - "Smithfield Foods, Inc., together with its subsidiaries, engages in the production and marketing of fresh meat and packaged meats products in the United States and internationally. The company involves in the production of hog; and produces various fresh pork, beef, poultry, and packaged meats products. It sells fresh pork to retail customers as unprocessed and trimmed cuts, such as butts, loins, picnics, and ribs; packaged meats products, including smoked and boiled hams, bacon, sausage, hot dogs, and deli and luncheon meats; specialty products, such as pepperoni and dry meat products; and ready-to-eat prepared foods comprising pre-cooked entrees, and pre-cooked bacon and sausages". (Business Description from Yahoo Finance)

4 reasons Smithfield is a buy at under $23 a share:

• Credit Suisse has an "outperform" rating and a $29 price target on SFD. The median analysts' price target on Smithfield is $28.
• The stock sells at just 7% over book value, 29% of revenues and has a five year projected PEG of under 1 (.78).
• Several insiders bought almost 300,000 shares in the third quarter when the stock dipped under $20.
• The stock is selling at the bottom its five year valuation range based on P/E and P/CF. Fitch also just upgraded its credit rating on the company.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in (BG) over the next 72 hours.