Buying shares in a global business when it is close to an all-time high sounds like madness, and probably is.
Nevertheless the Punter, who wishes he had trebled his money by buying big, boring GrainCorp (ASX code GNC) two years ago, has done just that.
It is inevitable that the war in Ukraine will end one way or the other sooner or later. When it does, and millions of tonnes of grain and oilseeds are released from Ukraine's silos, the price of those commodities seems likely to take a hit. It might make sense to wait in the hope that when that happens GNC shares become cheaper.
However, the Punter decided not to wait for that, or even for ABARE's winter crop report this week, so he bought 200 GNC at $9.60.
GrainCorp has been riding a strong cyclical upswing for more than a year. The Ukraine was just icing on the cake. In the half year to the end of March, GNC's earnings per share increased almost five fold to $1.07 a share. No wonder shareholders received a bonus second interim dividend of 12c.
Sooner or later the cycle will turn down again.
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However, when it does, GrainCorp has the buffer of being a global business, in a range of commodities. Ukraine's customers, once bitten, will be shy of becoming too dependent again on European supplies.
Moreover, GrainCorp is actively developing plant-based protein products, and cautiously buying into small ag-tech companies such as Loam, treating seed to capture carbon, and Hone, a start-up that has designed a hand-held device for testing grain and soil.
At a time when analysts are increasingly concerned about soaring prices and slowing economies, the Punter sees GrainCorp primarily as a defensive stock.
When things are really dire, people will buy bread even if they cannot afford to buy anything else.
- The Punter has no financial qualifications and no links to the financial services industry. He owns shares in a number of companies featured in this column.
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