Out Fox The $treet

Very interesting article at Economist.com about the huge transactions taking place in Farmland mainly surrounding Middle Eastern or China buyers of affordable, unproductive farmland in Africa. Most striking is the deal where Saudia Arabia is leasing land from Ethiopia and shipping the food back home. Some day this trend will likely reverse as Ethiopia catches onto the game and grows the food themselves and ships it to the Middle East for huge profits. Food is likely to be more scarce then oil/energy supplies in the future. Not to mention that the World Food Program provides Ethiopia with food that could just as easily get from the land they've just leased out. What about using that money for it instead as well? Hmm... All of these deals highlight the need for food in parts of the world and the available land in other parts. The investment increases in Sudan alone are enourmous. Stocks from farm equipment companies like Deere (DE), fertilizers like Potash (POT) and Mosiac (MOS), al...

Finally seeing a bottom in the numbers for FCSX. As reported after the close last night, FCSX saw improvements in OTC volume and segregated assets. As a reminder, FCSX made the majority of its income in 2008 on the interest income from customer assets. Seeing that bottom is a promising sign. * OTC volume (in thousands) of 30.8 contracts, compared to 25.7 contracts in March 2009 and 78.5 contracts in April 2008; * Exchange-traded contract volume (in thousands) of 4,151.9 contracts, compared to 5,008.8 contracts in March 2009 and 9,512.3 contracts in April 2008; and * Customer segregated assets (in millions) of $818.4 as of April 30, 2009, compared to $754.2 on March 31, 2009 and $1,556.4 on April 30, 2008.

FCStone (FCSX) is a compelling story that fell off the face of the market in 2008. They went from reporting a $78M profit in the year that ended in August 2008 to being worth hardly more then $30M. This was largely due to a trading account hit of over $100M that put serious doubts into the future of this company. FCSX has also taken a big hit from greatly reduced interest income due to the swooning short term interest rates. The need for risk management and hedging in the commodities sector has never been greater. Once FCSX gets past the issues created by the huge trading loss, I'd expect FCSX to regain its luster that saw the stock trade above $50 last year. The company has stayed afloat in this turbulent times without the need for dilutive financings. Somehow FCSX has been more impacted in the stock market then the major banks like Bank of America (BAC) and regional banks like BBT or STI. FCSX has no exposure to the mortgage or commercial real estate market. Yes, they were hit...

Maybe it's the fact that FCStone (FCSX) kinda rhymes with Stone Fox that we've liked this stock since it's IPO. Or maybe the fact that they are a commodity risk management company that came public during the great commodity boom. FCSX has generally reported strong results since that IPO but the stock is substantially lower now. Whether because of the credit crisis and counter party risks or bad debt exposure to clients, FCSX was hit extremely hard in 2008. The once highflying stock dropped from $53 all the way to $1.90. Sounds like a stock with huge growth problems, but the market might be surprised to learn that revenue grew by 16% last quarter YoY. Now how could a stock drop 96% yet still grow revenues? The only answer is FEAR. In all fairness the company did report a not loss of $3M in Q4 due to a $25.7M bad debt expense. Of course that impacted the stock and caused undue FEAR that all of their customers would default leaving FCSX holding the bag. Over 2 months have pass...