INVESTMENT IN PUBLICLY TRADED FIRMS AS A VERTICAL INTEGRATION AND A RISK DIVERSIFICATION STRATEGY

This research investigates the potential of investments in publicly traded value adding firms in the meat industry as a strategy for livestock producers to diversify risk and capture value-added profits, while allowing the producer to maintain management authority and minimize costs. The research determines the optimal portfolio of investments in up to 66 publicly traded value-added companies. The results indicate tat a portfolio consisting of livestock production and publicly traded value-added companies provides better returns at a lower risk than either a 100 percent investment in livestock production or a combination of livestock production and the S&P 500.