`Dot-Corn' Shares Mirror Dot-Com Stocks Bubble: Chart of Day

By Michael Patterson

Aug. 20 (Bloomberg) -- This year's drop in agricultural stocks, whose rally since 2003 outpaced the gains in technology shares that preceded the dot-com crash, may deepen as the economic slowdown reduces profits, according to Citigroup Inc.

``Investors have been stung of late in farm equipment and fertilizer stocks, but more pain could be coming,'' Tobias Levkovich, Citigroup's chief U.S. equity strategist, wrote in a research note on Aug. 18. ``There are significant cracks in the agricultural economy story. We have been very anxious that investors had gotten carried away with the global growth theme.''


The CHART OF THE DAY shows an index weighted by market- capitalization of five agricultural companies -- Monsanto Co., Potash Corp. of Saskatchewan Inc., Agrium Inc., Archer Daniels Midland Co. and Bunge Ltd. -- along with the Standard & Poor's 500 Information Technology Index.

Note the 842 percent rise in the agricultural index during the five-year period before its peak in June. That surpassed the 755 percent gain in the S&P 500 technology index from March 1995 to March 2000, when the industry and the rest of the U.S. stock market began a 2 1/2-year descent.

Levkovich wrote that he's ``worried about what has been dubbed the `dot-corn' stocks relative to the dot-com names of the late 1990s.''

Low price-to-earnings ratios for agricultural shares ``should not provide any valuation comfort since that often reflects the market's ability to sniff out the likelihood of peak earnings,'' the New York-based strategist wrote.

To contact the reporter on this story: Michael Patterson in London at mpatterson10@bloomberg.net.