Proof We Were Right

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Created on Wednesday, 30 November 2011 14:29

Written by andrew Snyder, Editorial Director, Insiders Strategy Group

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ConAgra Foods made a big move yesterday. It only shelled out $10 million, but its decision to buy more of a tiny food company proves we were right.

ConAgra Foods (CAG:NYSE) made headlines yesterday. It is great news for Safe Haven Investor subscribers.

The company is not in our portfolio. It's too diversified -- a hand in too many baskets. It helps explain why its shares have not traded out of a narrow band for the past 24 months.

But what the company did yesterday proves our strategy is on the right track.

Before the bell, ConAgra told us it opened its wallet and bought another $10 million worth of Agro Tech Foods shares. It's now the majority owner of the Indian company.

The move is great news for us for two reasons.

First... the food angle.

The world is hungry. We've got 7 billion mouths to feed. Population growth is greatly outpacing the pace of crop yield expansion. It is a natural supply imbalance. As demand rises, prices will follow.

It is a situation that has governments across the globe scrambling for a solution. Here's a bit of what I told Safe Haven Investor subscribers when I wrote about what I call the "essential" resource:

Across the planet, governments are doing everything they can to ensure secure sources of food for their citizens. Even here in the United States, our government hands anywhere from $10 billion to $30 billion to farmers each year... just so they don't succumb to greed and develop their land. We are desperate for every kernel of grain they can grow -- and we're forced to pay, whatever the cost.

ConAgra is getting in on that game. By nabbing a stake in a country with some of the hottest growth and hungriest mouths, it puts its hands under a spigot of cash.

But there is more to this story.

ConAgra is a rich company. It earns nearly 2 billion bucks a year and has over a billion in cash on hand. It could buy a lot of companies. But it chose tiny Agro Tech.

... a small cap with a market value of about $200 million.

It is not a coincidence a company like ConAgra is jumping into small caps at the same time we launch our first-ever small-cap newsletter.

We created Small Cap Insider because we believe this is the best time in a long time to invest in the little guy.

Here's why. It goes back to what I wrote on Nov. 21:

With the exception of when fear is highest, small caps have a strong tendency to outperform their larger brethren. That means the time to buy is when fear is at its peak.

Look around. Open up any newspaper. Turn on the TV.

Fear is everywhere.

We're scared of a meltdown in Europe. We're scared the Occupy crowd will turn violent. We're scared our government will destroy our great nation's heritage.

Because of it all, stocks are cheap. Some of the small caps we've looked at over the past few months are the cheapest they've been in over a decade.

Our strategy in this mess is simple... forget what you've been told. It's time for unconventional techniques. It is exactly why I told my readers to buy shares of a small cap that is in the heart of the food industry.

We made our move with great timing. ConAgra tipped its hand yesterday. Valuations of companies across the food spectrum jumped... including our stake.

Despite the malaise created by political and economic uncertainty, opportunities remain. No matter how bad things get... we still need to eat.

P.S. I believe Derek Simon, the editor of our brand-new Small Cap Insider, is on to something big. He recently told us about what he calls Protocol 5. It's a technology that has the potential to retool the way we look at the Internet... and, much more importantly, put big profits in the pockets of some very small companies. Get all the details here.

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