Buying stock in value‐added companies: an alternative choice for vertical diversification?

Recent research has indicated that livestock producers who want to manage risk and diversify their operations should invest in the stock market. This research evaluates whether or not a portfolio of publicly held companies that are first handlers of pork products would provide pork producers with a means of enhancing annual returns and reducing the volatility in the annual returns. Ex ante results suggest producers can gain from investment in value‐added stocks. Ex post results, however, imply producers must choose active management of their portfolio to receive the same type of benefits as the ex ante portfolio.