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Do you like big, delicious melons?
This agronomics company is making mouth-watering melons by enhancing the fruit's DNA
Better yet, the stock trades for only $3 a share!
by Charles R. Wolpoff
That's right — only US$3 a share. That's about a market cap of only US$62 million... yet the company generated revenues in excess of US$240 million last year.
These stocks are so cheap — I just recommended them both in my services, The Cutting Edge and Rogue Trader. And now I'm recommending them in Taipan. Why?
As you know, I'm a microcap investor. And I love buying stocks trading below 1x sales, and trading below the industry average. Listen to this — if this stock traded at the industry price-to-sales ratio of 1.6, this US$2.00 stock would trade at about US$15 a share.
Okay, I know what you're thinking — the company's core business is agriculture. It grows fruits and vegetables.
Exciting stuff, I know. But the company's agriculture business is a conduit for something bigger. Much bigger.
Actually, size doesn't matter to farmers. Although melons have been getting bigger year after year, what really matters... what really puts cold, hard cash in the pockets of farmers, is better ripening techniques and longer shelf life.
That's really important — longer shelf life. The longer a melon's shelf life, the longer it can stay fresh and be sold to the consumer. All of this is being changed at the genetic level by one of the companies I'm going to tell you about.
I know what you're thinking — genetically engineered fruits and vegetables are unhealthy. Before you know it — genetically altered fruit will turn everybody into roving hordes of Keith Richards.
"You will feel a slight metabolic change..."
But what many people don't understand is that humans have been altering plant genes for thousands of years.
Let's go back in time
Tens of thousands of years ago, people wandered the earth, collecting and eating only what they found growing in nature.
By about 8,000 BC, however, the first farmers decided to stay in one place and grow certain plants as crops — creating agriculture and civilization, in that order.
For thousands of years, from the time human communities began to settle in one place, cultivate crops and farm the land, humans have been manipulating the genetic nature of the crops and animals they raise. Crops have been bred to improve yields, enhance taste and extend the growing season.
Each of the 15 major crop plants that provide 90 percent of the globe's food and energy intake has been extensively manipulated, hybridized, inter-bred and modified over the millennia by countless generations of farmers intent on producing crops in the most effective and efficient ways possible.
Plant biotechnology is just an extension of this traditional plant breeding, with one very important difference — plant biotechnology allows for the transfer of a greater variety of genetic information in a more precise, controlled manner.
What they're doing
Traditional plant breeding involves the crossing of hundreds or thousands of genes, whereas plant biotechnology allows for the transfer of one desirable gene at a time.
This more precise science allows plant breeders to develop crops with specific beneficial traits, while eliminating undesirable ones.
Many of the beneficial traits in new plant varieties fight plant pests — insects, weeds and diseases.
Others provide quality improvements, such as tastier fruits and vegetables; processing advantages, such as tomatoes with higher solids content; and nutrition enhancements, such as oil seeds that produce oils with lower saturated fat content.
But why?
One of the few certainties of the future is that the world's population will continue its rapid growth, reaching almost 10 billion inhabitants by the year 2030.
Experts say biotechnology innovations will triple crop yields without requiring any additional farmland.
Other innovations can reduce or eliminate reliance on pesticides and herbicides that may contribute to environmental degradation. Still others can preserve precious ground soil and water resources. And a company called Agritope (AGTO-NASDAQ) is doing just that.
Agritope is altering the genes of many plants and processes. But the ones I'm most concerned with are melons, tomatoes, and raspberries.
Combined, these three plants present AGTO with a market worth more than US$2.5 billion in the U.S. Currently Agritope trades at a miniscule market cap of just US$17 million. That's peanuts compared to the company's potential.
At a market cap of just US$17 million, I'm willing to speculate aggressively.
And it appears some institutional investors are willing to speculate as well.
In the past 3 months, institutions have started accumulating the stock to the tune of +100,000 shares. Sure, that's nothing. But if you compare it to institutional investment in the previous months, it's substantial.
AGTO's float is pretty tight — at about 3.3 million shares. Be disciplined in your buying.
Buy AGTO under US$5.00 a share. Taipan's one year price target is between US$18 to US$15 a share.
Buy BVA Under US$4 A Share
I love cheap stocks. Especially ones that are making solid revenues in emerging sectors. Bionova Holding Corp. (BVA:AMEX) meets all my criteria.
BVA is a holding company that owns companies that grow, market, distribute, and genetically improve fruits and vegetables. You think there's no money in agro-biotechnology? Think again.
BVA generated revenues in excess of US$240 million last year,
but only trades at a market cap of US$62 million! In addition, BVA's trailing three month price to sales ratio is 0.12, while the industry average is 1.6.
What does all this mean to you? It means that BVA is grossly undervalued. Probably the most undervalued stock in its sector.
If BVA traded at the industry price-to-sales ratio it would trade at US$15 a share!
As a pure value play, buy BVA aggressively under US$4.00 a share.
Brian Hicks is the editor of Cutting Edge, a twice-monthly newsletter that focuses on opportunities in the microcap sector.
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