I don't like sectors that there are too many variables. Here alot of factors determine input cost from corn, then we have demand effecting price. The weather is a factor, how much corn are farmers gonna grow next year. I simply dont have the answer to all these question and I much rather own something that is much simpler to understand. The more variables added to a business the greater chance of failure, the same applies ot and investment.
Plus keep in mind you not buy this sector at the bottom many of these stock are up more then 100% ytd, so a lot of good news is priced in at this point. Do I have any knowledge that the weathe ris gonna take a turn, I don't, but nobody does, and that in lies the problem after this kind of run allready has happened.
Right now alot of these stocks have a lot of variables are up a ton, everything has went there way this year with the weather, are trading at significant multiples, getting near market, and in my opinion they should trade at a discount to market, plenty of them carry debt as well. Overall I just don't like the sector and this there are better and easier opportunities to make money at this point. To me it is all about sustainability of earnings, and my belief is your seeing close to peak earnings right now in my opinion in the sector. All is just my opinion, and I could always be wrong though.
