Debating whether or not the agricultural trade can keep working for you in 2008, with the Fast Money crew.-- CNBC
http://www.cnbc.com/id/15840232?video=616736027
Saturday, December 29, 2007
Monday, December 24, 2007
Fertilizer Stocks Boosted by Global Demand, Ethanol Subsidies
Wednesday December 12, 9:35 am ET By the tickerspy.com Staff
Global factors have come together to boost the fortunes of fertilizer producers this year. Millions of acres in the U.S. have been turned over to corn production thanks to subsidies promoting ethanol. In Asia, growing affluence has led to an increase in demand for meat, which in turn has driven demand for grain to feed livestock
The combination of factors has led the price of food to hit historic highs. This week, The Economist said that its food price index "is now at its highest since it began in 1845, having risen by one-third in the past year." While this has made the going tough for many food companies and restaurants as the price of ingredients has risen, it has been a boon for fertilizer companies, as farmers have been tasked with upping their yields in order to meet demand.
Potash (NYSE: POT - News), a Canadian firm specializing in potash, a form of potassium carbonate, as well as nitrogen and phosphate, all of which have agricultural applications, is the biggest company in the sector. Thanks to a limited amount of production globally, potash is the company's most profitable product. Potash's potash comes from its mines in Canada, and the cost of replicating these massive mines represents a serious barrier to entry. Potash producer Mosaic (NYSE: MOS - News) is the industry's other giant.
High oil prices, which keep demand for biofuels high, have been another recent catalyst for fertilizer firms, while Canadian producer Agrium's (NYSE: AGU - News) $2.16 billion offer for agricultural-products distributor UAP Holding (Nasdaq: UAPH - News) earlier this month has helped confirm the positive sentiment toward the sector.
Several institutional investors are locked into the bullish market for fertilizer firms. Hedge fund Dawson Herman Capital Management, which "has traditionally invested in the growth sectors of the U.S. economy," according to its website, has substantial exposure to the sector. Its top-three (and four of its top seven) U.S-listed equity holdings are fertilizer producers. During Q3, the firm added shares in Terra Industries (NYSE: TRA - News), a firm that produces nitrogen and methanol products for agricultural and industrial markets, and CF Industries (NYSE: CF - News), which operates in two segments, nitrogen fertilizers and phosphate fertilizers. The firm also slightly trimmed its stakes in Potash and Mosaic.
Dawson also held shares of companies in other sectors, with its largest equity holding outside the fertilizer industry being a 719.7k stake in global engineering and construction firm Foster Wheeler (Nasdaq: FWLT - News). A list of the other companies Dawson is investing in is available at tickerspy.com.
Another hedge fund, Peconic Partners, which "focuses on combining a top-down view of the markets with risk management and strong fundamental stock selection," according to its website, is also a big holder of fertilizer producers' shares. Its top-two holdings are Mosaic and CF, but it also has large stakes in Potash and Agrium. Outside of the fertilizer sector, Peconic's largest stake is in McDermott International (NYSE: MDR - News), an engineering and construction firm serving the oil and gas industry. A list of the other companies Peconic is investing in is available at tickerspy.com.
Potash proved to be the most popular fertilizer company among Pro investors in Q3. Among the 26 investment firms holding stakes in the company, the largest was a 19.2 million-share stake held by investment advisor Capital Guardian Trust. Meanwhile, Potash is also the favorite fertilizer stock among tickerspy members, though Terra Nitrogen (NYSE: TNH - News), an incredibly volatile master limited partnership (MLP) with a focus on nitrogen fertilizer products, is popular as well.
Global factors have come together to boost the fortunes of fertilizer producers this year. Millions of acres in the U.S. have been turned over to corn production thanks to subsidies promoting ethanol. In Asia, growing affluence has led to an increase in demand for meat, which in turn has driven demand for grain to feed livestock
The combination of factors has led the price of food to hit historic highs. This week, The Economist said that its food price index "is now at its highest since it began in 1845, having risen by one-third in the past year." While this has made the going tough for many food companies and restaurants as the price of ingredients has risen, it has been a boon for fertilizer companies, as farmers have been tasked with upping their yields in order to meet demand.
Potash (NYSE: POT - News), a Canadian firm specializing in potash, a form of potassium carbonate, as well as nitrogen and phosphate, all of which have agricultural applications, is the biggest company in the sector. Thanks to a limited amount of production globally, potash is the company's most profitable product. Potash's potash comes from its mines in Canada, and the cost of replicating these massive mines represents a serious barrier to entry. Potash producer Mosaic (NYSE: MOS - News) is the industry's other giant.
High oil prices, which keep demand for biofuels high, have been another recent catalyst for fertilizer firms, while Canadian producer Agrium's (NYSE: AGU - News) $2.16 billion offer for agricultural-products distributor UAP Holding (Nasdaq: UAPH - News) earlier this month has helped confirm the positive sentiment toward the sector.
Several institutional investors are locked into the bullish market for fertilizer firms. Hedge fund Dawson Herman Capital Management, which "has traditionally invested in the growth sectors of the U.S. economy," according to its website, has substantial exposure to the sector. Its top-three (and four of its top seven) U.S-listed equity holdings are fertilizer producers. During Q3, the firm added shares in Terra Industries (NYSE: TRA - News), a firm that produces nitrogen and methanol products for agricultural and industrial markets, and CF Industries (NYSE: CF - News), which operates in two segments, nitrogen fertilizers and phosphate fertilizers. The firm also slightly trimmed its stakes in Potash and Mosaic.
Dawson also held shares of companies in other sectors, with its largest equity holding outside the fertilizer industry being a 719.7k stake in global engineering and construction firm Foster Wheeler (Nasdaq: FWLT - News). A list of the other companies Dawson is investing in is available at tickerspy.com.
Another hedge fund, Peconic Partners, which "focuses on combining a top-down view of the markets with risk management and strong fundamental stock selection," according to its website, is also a big holder of fertilizer producers' shares. Its top-two holdings are Mosaic and CF, but it also has large stakes in Potash and Agrium. Outside of the fertilizer sector, Peconic's largest stake is in McDermott International (NYSE: MDR - News), an engineering and construction firm serving the oil and gas industry. A list of the other companies Peconic is investing in is available at tickerspy.com.
Potash proved to be the most popular fertilizer company among Pro investors in Q3. Among the 26 investment firms holding stakes in the company, the largest was a 19.2 million-share stake held by investment advisor Capital Guardian Trust. Meanwhile, Potash is also the favorite fertilizer stock among tickerspy members, though Terra Nitrogen (NYSE: TNH - News), an incredibly volatile master limited partnership (MLP) with a focus on nitrogen fertilizer products, is popular as well.
Cramer's recommendation of AGU
Agrium's Green Thumb - Jim Cramer's Mad Money TV show on CNBC The demand for agriculture products is huge, and many companies are benefitting, Cramer told viewers. One such company is Agrium (AGU - Cramer's Take - Stockpickr - Rating), a long-term Cramer favorite. Not only is Agrium priced well below where it should be, but it looks like it's poised to profit from its acquisition of UAP Holding (UAPH - Cramer's Take - Stockpickr - Rating), he said
Agribusiness ETF Moos At Energy-Bill Signing
Hungry for profit? Agricultural funds might fill your craving. - Investor's Business Daily
Take Market Vectors Agribusiness (AMEX:MOO - News). The exchange traded fund tracks the DAXglobal Agribusiness Index (from the Frankfurt exchange). With 37 stocks in its basket, the fund offers investors a chance to own a piece of all things agricultural, from farm-equipment makers to livestock providers.
Apart from its entertaining ticker, the nearly 4-month-old fund has kept investors smiling since its inception. It has an Investor's Business Daily Relative Strength Rating of 90, and has been finding support at its 10-week line despite a slight pullback last month. With $441 million in assets, 93% of its holdings are in food-related manufacturing companies. The remaining 7% are in health care and consumer services companies.
While the fund hit its low at 40.19 the second week out, it's been moving steadily upward since then. Hovering around 53.50 on Thursday, it has been reaching to recoup its Dec. 7 record high of 54.95.
You Gotta Eat
Food doesn't go out of fashion. Even after the market dived in 2002, agribusiness remained steady.
In fact, demand for food and food-related products is shooting up. Burgeoning economies in emerging markets such as China and India have given rise to an expanding middle class. More wealth results in a change in diet with more demand for meat and animal products. Raising those animals requires more grain.
It doesn't look as if the world's appetite will be satisfied anytime soon, either. The United Nations predicts that the world's population will rise by 50% by 2050.
Energy Bill
In addition, increased biofuel use around the globe translates to higher corn, sugar and palm oil production. Here in the U.S., President Bush signed off on a new energy bill Wednesday that sets higher vehicle fuel economy standards and household appliance efficiency standards. It also mandates increased production of renewable fuels.
The fund's biggest holdings, which include some of agribusiness' heaviest hitters, are reaping those benefits. Most moved up Wednesday after the energy bill was signed.
At 10% of the fund, Mosaic (NYSE:MOS - News) is leading the pack. One of the world's leading fertilizer and pesticide producers, the Plymouth, Minn.-based company has an outstanding 99 RS rating. Mosaic has beat estimates two quarters in a row, and analysts expect its earnings per share to rocket up 325% this year from 80 cents to $3.40.
Agricultural biotech giant Monsanto (NYSE:MON - News) is also pushing up the fund. As the ETF's second-biggest holding at 9%, Monsanto develops insect- and herbicide-resistant seeds and other agricultural products.
Take Market Vectors Agribusiness (AMEX:MOO - News). The exchange traded fund tracks the DAXglobal Agribusiness Index (from the Frankfurt exchange). With 37 stocks in its basket, the fund offers investors a chance to own a piece of all things agricultural, from farm-equipment makers to livestock providers.
Apart from its entertaining ticker, the nearly 4-month-old fund has kept investors smiling since its inception. It has an Investor's Business Daily Relative Strength Rating of 90, and has been finding support at its 10-week line despite a slight pullback last month. With $441 million in assets, 93% of its holdings are in food-related manufacturing companies. The remaining 7% are in health care and consumer services companies.
While the fund hit its low at 40.19 the second week out, it's been moving steadily upward since then. Hovering around 53.50 on Thursday, it has been reaching to recoup its Dec. 7 record high of 54.95.
You Gotta Eat
Food doesn't go out of fashion. Even after the market dived in 2002, agribusiness remained steady.
In fact, demand for food and food-related products is shooting up. Burgeoning economies in emerging markets such as China and India have given rise to an expanding middle class. More wealth results in a change in diet with more demand for meat and animal products. Raising those animals requires more grain.
It doesn't look as if the world's appetite will be satisfied anytime soon, either. The United Nations predicts that the world's population will rise by 50% by 2050.
Energy Bill
In addition, increased biofuel use around the globe translates to higher corn, sugar and palm oil production. Here in the U.S., President Bush signed off on a new energy bill Wednesday that sets higher vehicle fuel economy standards and household appliance efficiency standards. It also mandates increased production of renewable fuels.
The fund's biggest holdings, which include some of agribusiness' heaviest hitters, are reaping those benefits. Most moved up Wednesday after the energy bill was signed.
At 10% of the fund, Mosaic (NYSE:MOS - News) is leading the pack. One of the world's leading fertilizer and pesticide producers, the Plymouth, Minn.-based company has an outstanding 99 RS rating. Mosaic has beat estimates two quarters in a row, and analysts expect its earnings per share to rocket up 325% this year from 80 cents to $3.40.
Agricultural biotech giant Monsanto (NYSE:MON - News) is also pushing up the fund. As the ETF's second-biggest holding at 9%, Monsanto develops insect- and herbicide-resistant seeds and other agricultural products.
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