The value effect has been a very potent source of alpha in the past. I advocate investing in stocks based on value over trying to divine the price movements of commodities. Investors seeking alpha in the agricultural sector are better served by trying to find cheap stocks to buy instead of trying to guess the price movements in futures markets.
This perspective is also based on the observation that commodity markets are tough to predict. A price performance comparison between popular funds, such as the iPath Pure Beta Agriculture ETN (DIRT) and the iPath DJ-UBS Agriculture TR Sub-Idx ETN (JJA), versus corn futures has shown that a long corn position outperformed almost all commodity and commodity-related investment products in 2012. However, so far in 2013, positions in corn have underperformed U.S. equities.
Thus, investors looking into the agricultural sector must carefully seek individual opportunities as opposed to a
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