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A Strange New Way to Invest in Corn

By Rob Fannon, editor Phase 1 Investor
Friday, June 20, 2008

Biotech is no longer just a drugs game.
I'm at the annual Biotechnology Industry Organization (aka "BIO") Conference here in San Diego. The buzzwords I keep hearing are biofuels, green energy, and agribusiness. This year's tag line is Innovate. Heal, Fuel, Feed the World. And no shortage of businesses are claiming to do just that...
On Tuesday, keynote speaker Arnold Schwarzenegger highlighted several state energy programs that use biotechnology. And before the "governator" took the stage, genomics pioneer Dr. Craig Venter discussed his biofuels research...
As CEO of Celera Genomics, Venter headed efforts to sequence the human genome. Today, he's launched his own private research institute focused on creating synthetic life forms... Essentially, he's making creatures that eat carbon and excrete fuel.
Innovators like Venter are about to make a boatload of money in ag-bio, biofuels, and other "green" life-science technologies.
You see, when oil was $30 a barrel and corn still cost $2, biotechs didn't have a reason to develop alternative energies or agricultural breakthroughs. Now, oil is over $130 and corn is $7.50 – and hitting new highs along with wheat, soybeans, and rice. The biotech industry wants a piece of the action...
Large players like Monsanto (MON) and Syngenta (SYT) dominate the food side of the game. Both companies develop insect-resistant crops and genetically engineered seeds. Over the last year, Monsanto's shares have doubled, up nearly 110%. Syngenta is up nearly 75%. Both are still in relentless uptrends.
But today, the stocks are too rich for my taste: Monsanto sells for 45 times earnings and Syngenta for 30.
One company I like better is Denmark-based Novozymes. Novozymes works on food, energy, and... oh yeah... drugs. The company makes specialty enzymes. Its products are used in dishwashing detergents, food and alcohol production, oil and ethanol processing, livestock feed, and pharmaceuticals. Novozymes netted $1.5 billion in sales last year. And the $5 billion company is trading at reasonable levels today.
The one catch is that the stock trades on the OMX Nordic Exchange in Copenhagen. That makes it more difficult for U.S. investors to buy.
The same is true of a couple of other interesting companies I found at BIO...
Take Danish company Danisco, for example. Danisco is one of Europe's largest producers of sugar. Its technology also transforms raw materials into livestock feed, biofuel, and plastics. Last year, it brought in $4 billion in sales from customers in close to 50 different countries.
And Euronext-traded DSM sells plastics, polymers, and chemicals used in human health and animal feed. And half of its $13 billion in sales last year came from industrial materials. The $10 billion company also has a manufacturing relationship with one of my favorite Phase 1 picks, Dutch biotech Crucell (CRXL).
I'm not suggesting you buy any of these stocks, not without putting in some solid research. But these companies are all cashing in on a trend I expect to track for some time. The agriculture and energy sectors are minting money right now... As the biotech industry is figuring out, there's plenty to go around.
Good investing,
Rob Fannon

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Market Watch
Symbol Price
S&P 500 1221.53 +1.3% +10.1%
Oil 38.31 +1.4% -0.6%
Gold 138.07 +2.1% +16.3%
Silver 28.60 +2.4% +53.6%
US-Dollar 80.67 -0.8% +8.1%
Euro 1.32 +0.6% -12.1%
Volatility 18.01 -7.1% -19.8%
Gold Stocks 581.56 +3.0% +17.0%
10-Year Yield 3.02 +0.7% -10.7%

World ETFs
Symbol Price
USA 122.89 +0.3% +11.3%
Canada 30.50 +0.2% +16.2%
Russia 21.94 +1.4% +18.1%
India 37.85 +0.3% +22.3%
Israel 16.69 +1.3% +10.8%
Japan 10.64 +0.6% +6.5%
Singapore 13.73 -1.1% +18.8%
Taiwan 14.78 +0.4% +19.2%
S. Korea 57.31 +1.3% +23.4%
S. Africa 71.87 +1.4% +28.2%
China 44.42 -1.4% -0.6%
Lat.America 53.17 +0.7% +8.4%

Sector ETFs
Symbol Price
Oil Service 137.59 +1.0% +18.9%
Big Pharma 64.14 +0.0% -3.2%
Internet 72.07 -0.1% +23.4%
Semis 16.22 +1.2% +29.4%
Utilities 31.28 +0.2% +1.5%
Defense 18.52 +0.1% +10.6%
Nanotech 10.03 +0.4% +1.6%
Alt. Energy 10.08 +1.3% -3.3%
Water 18.49 +1.0% +14.5%
Insurance 16.14 +0.4% +21.1%
Biotech 20.54 -0.2% +28.1%
Retail 19.70 +0.3% +30.2%
Software 24.79 +0.8% +25.9%
Big Tech 53.87 +0.3% +22.7%
Construction 13.10 +0.9% +15.7%
Media 13.64 +0.5% +26.0%
Consumer Svcs 67.39 +0.2% +24.5%
Financials 55.04 +0.3% +7.4%
Health Care 64.30 +0.1% +2.0%
Industrials 63.54 +0.5% +21.0%
Basic Mat 74.35 +1.1% +25.3%
Real Estate 55.32 +0.1% +25.0%
Transportation 91.77 +0.7% +26.9%
Telecom 22.59 +0.5% +17.8%