Come spring, Tim Recker plans to demolish two rotting barns and a dilapidated workshop on his 1,500-acre farm in Arlington, Iowa. In their place will sit about three acres of rich, black topsoil prime for capitalizing on the biggest global grain boom in decades.
"Every acre is more valuable than it was five years ago," says Mr. Recker, a farmer and land excavator.
With corn, wheat, soybeans, barley, sunflowers and other grains selling at or near record prices, U.S. farmers are preparing for a potentially historic planting season. A rush to make biofuels from crops and soaring demand for grains in China, India and other emerging markets have pushed up grain prices world-wide, helping drive food prices higher.
A potentially historic season creates opportunities and risks for farmers.
Just yesterday, Kraft Foods Inc. -- echoing similar announcements earlier in the week by Tyson Foods Inc. and Hershey Co. -- said it will raise prices this year because of higher costs, and Kellogg Co. said its fourth-quarter profit fell because of higher commodity prices.
The shift has created huge opportunities in the Farm Belt as growers make their annual decisions about which crops to plant, how much land they need, which fertilizer and pesticides to buy, and how much of their crop to sell ahead of time on futures markets.
But there are risks, too. Farmland prices have climbed more than 20% over the past year in many Midwestern states, so the many growers who lease land are shelling out higher rents. Some seed prices have jumped 30%, and fertilizer prices have doubled nearly across the board. Nocturnal thieves are stealing grains from unlocked bins. And ever looming is the prospect of a drought, which could push prices even higher, sending shock waves through global grain markets.
Farmers are left to wonder: Could the grain boom be another bubble like dot-com and housing?
Crop prices have been bouncing up and down in recent weeks: Wednesday of last week, corn
trading on the Chicago Board of Trade dropped nearly 20 cents a bushel, the exchange-traded daily limit. The following day, corn was back up 20 cents, to nearly $5 a bushel, about where the
March contract closed yesterday.
Craig Ratajczyk, director of global issues at the U.S. Soybean Export Council, says he is warning farmers that grain markets this year will be characterized by "wild gyrations." And despite the high prices they are fetching for their grain, some farmers won't be as profitable because of the higher costs.
Minnesota grain farmer Kevin Paap says he is excited by the "potential" in the grain markets. But he says his "stomach's in a little bit of a knot because of all that risk both on the upside and the downside."
This year, he likely will plant half of his crop in corn and half in soybeans, a change from last year, when he planted more than half of his crop as corn because its profit potential was far more attractive than soybeans. Last year, the market was saying "we need more corn acres," says Mr. Paap. "This year, the markets are telling us they want more everything." He also says soybeans are looking better this year because they tend to withstand dry weather better than corn and because they are generally cheaper to plant, partly because they require less fertilizer.
It was simpler last year. With ethanol plants sprouting across the Midwest, corn prices were running higher than farmers had seen in a decade and the price of land and fertilizer and other input costs hadn't yet spiked.
Farmers planted about 93 million acres of corn, a 20% increase over the previous year and the most since 1944. Experts figured the big crop would push prices back down, easing pressure on livestock farmers, who feed corn to their animals, and helping ethanol producers remain profitable.
Instead, corn prices stayed well above 2006 levels, in part because demand continued to grow and inventories were at near-historic lows at the end of the harvest. As farmers switched out of soybeans, wheat and other crops to plant corn, the prices of those crops rose, too. For instance, soybean acreage declined 16% as farmers opted for corn. The March soybean contract yesterday settled at $12.758 a bushel, up from $7.21 a year earlier.
Keith Collins, former chief economist at the U.S. Agriculture Department, recently said he expected that planted corn acres in the U.S. would decline as much as 8% this year, while soybean acres would rebound to 70 million acres, up about 10% from last year.
Most agricultural economists agree that key factors underlying the farm boom are likely to persist. "Once people enter the middle class and move up the income and food ladder, they rarely regress," says Rich Feltes, senior vice president and director of commodity research at MF Global.
Landowners world-wide are trying to get as much as possible out of their fields. Farmers are looking to expand fields in Canada, where growers tend to idle more land, and Brazil, where large tracts lie uncultivated. Russia, Algeria and South Africa all have expanded their grain production. In the U.S., farmers like Mr. Recker are razing old barns, ripping up sod and grassland, and uprooting fences -- some in a routine attempt to improve land, others in an effort to make room for the grain boom. "They're trying to squeeze everything they can" out of their land, says Kent
Cramer, an excavator in Belmond, Iowa.
Food prices are widely expected to push even higher this year, even if the U.S. enters a recession, economists say, because food is typically one of the last goods to be affected by a downturn.
Still, this month's global stock-market tumult temporarily slowed the steady rise of agriculture-related stocks, which have been outperforming most stocks. The week of Jan. 14, the shares of farm-equipment maker Deere & Co. dropped nearly 20%, but the stock yesterday still was up 73% from a year ago. Seed giant Monsanto Co.'s stock dived 17% that same week. It has doubled since last year.
While seed suppliers see robust sales continuing, Dan Basse, president of Chicago-based AgResource Co., an agricultural-research firm, says this is evidence that the farm economy and the overall economy are still "tied at the hip." He worries that any recession in the U.S. could spill over into Asia and curb demand for food in those places that are driving demand here.
That resonates for Kip Tom, who farms 12,000 acres in Leesburg, Ind. He decided to sell 80% of his 2008 corn crop on the futures market -- locking in a price at more than $5 a bushel -- even though he hasn't planted a seed yet. Normally, he says, he might have sold only about half of his crop this early in the year. "We just think this rally is too good to be true," he says.
Write to Lauren Etter at lauren.etter@wsj.com from Wall St Journal
Thursday, January 31, 2008
Stocks Had Bad January--So Is It Time to Buy?
Stock-market lore suggests that what happens in January doesn’t stay in January -- it sets the tone for the rest of the year.
Let’s hope they’re wrong.
As of Wednesday’s close, the Dow was down 6.2% for the month, wiping out most of the blue-chip index’s gains for all of 2007. The S&P and Nasdaq, meanwhile, are on track to post their worst January records ever.
Does that mean the market is going to have a bad 2008 or is the worst over? While many market pros think stocks may be in for a rough ride for several more months, there still are buying opportunities you can take advantage of now.
Adriana Posada, a portfolio manager at American Beacon, recommends Bank of America (NYSE:BAC - News) as a stock to get you through this volatile market. It’s taken a hit from the subprime crisis, but “it has weathered storms similar to these in the past,” she said on CNBC.
James Parker, an airline analyst at Raymond James, likes Southwest Airlines (NYSE:LUV - News).
“I believe in uncertain economic times like we have now that good companies go on sale,” he told CNBC, noting that the stock is off 30% from its high last year.
CNBC's Jim Cramer, who called the Federal Reserve's latest rate cut on Wednesday "incredibly positive," believes that "we are basically out of the woods."
"The markets should be up a substantial amount from here," he said.
"Financials should be bought," including Citigroup (NYSE:C - News), Cramer added. Retail and General Motors' (NYSE:GM - News) preferred stock is a buy, too.
And so is the agriculture sector.
Cramer gave the thumbs up to Bunge (NYSE:BG - News), Archer Daniels Midland (NYSE:ADM - News) and the fertilizer companies.
"The big sell-off has occurred and the group is ready to re-charge," he said.
Others are more cautious, however.
Brian Gendreau, an investment strategist at ING Investment Management, thinks there’s probably more bad news to come for the economy, which will keep the market flat to lower during the first half of the year. He sees the second quarter as the time to start buying again, ahead of a projected second-half rally.
“The market was split between the recessionary camp and the slow-growth camp,” Gendreau says of January. “It resolved itself in the first three weeks of January … the market went from pricing in a recession to saying, with all the stimulus, if we have a recession, it will be short and shallow.”
“The question is,” Gendreau said, “will the real market please stand up?”
For those of you keeping score at home, the S&P, which is widely viewed as a better reflection of the broader U.S. market, is down a record 7.7% for the month, more than twice what it gained in 2007. The last time the S&P posted such a hefty January loss was 1970, when Ronald Reagan was California’s governor and Richard Nixon was president. The index dropped 7.6% that month.
The tech-heavy Nasdaq, which has plunged 11.4% this year, is experiencing a little more déjà vu: The last time it started the year off with this big of a loss was 1990 when a man named George Bush lived at 1600 Pennsylvania Avenue and a politician named Clinton was getting ready to make a run for the White House. The Nasdaq fell 8.6% that month.
Energy, telecom and tech were among the sectors hardest hit in January to date, down 11%, 12% and 14%, respectively.
Gendreau says these sectors, which derive a large portion of their revenue from globalized trade, will reassert their leadership by year end. Specifically, he cites industrial, tech, material and energy stocks.
Oh, and just a fun little factoid: Historically, with the exception of 2001, legislation providing fiscal stimulus typically occurs in the last month of or several months after a recession.
Let’s hope they’re wrong.
As of Wednesday’s close, the Dow was down 6.2% for the month, wiping out most of the blue-chip index’s gains for all of 2007. The S&P and Nasdaq, meanwhile, are on track to post their worst January records ever.
Does that mean the market is going to have a bad 2008 or is the worst over? While many market pros think stocks may be in for a rough ride for several more months, there still are buying opportunities you can take advantage of now.
Adriana Posada, a portfolio manager at American Beacon, recommends Bank of America (NYSE:BAC - News) as a stock to get you through this volatile market. It’s taken a hit from the subprime crisis, but “it has weathered storms similar to these in the past,” she said on CNBC.
James Parker, an airline analyst at Raymond James, likes Southwest Airlines (NYSE:LUV - News).
“I believe in uncertain economic times like we have now that good companies go on sale,” he told CNBC, noting that the stock is off 30% from its high last year.
CNBC's Jim Cramer, who called the Federal Reserve's latest rate cut on Wednesday "incredibly positive," believes that "we are basically out of the woods."
"The markets should be up a substantial amount from here," he said.
"Financials should be bought," including Citigroup (NYSE:C - News), Cramer added. Retail and General Motors' (NYSE:GM - News) preferred stock is a buy, too.
And so is the agriculture sector.
Cramer gave the thumbs up to Bunge (NYSE:BG - News), Archer Daniels Midland (NYSE:ADM - News) and the fertilizer companies.
"The big sell-off has occurred and the group is ready to re-charge," he said.
Others are more cautious, however.
Brian Gendreau, an investment strategist at ING Investment Management, thinks there’s probably more bad news to come for the economy, which will keep the market flat to lower during the first half of the year. He sees the second quarter as the time to start buying again, ahead of a projected second-half rally.
“The market was split between the recessionary camp and the slow-growth camp,” Gendreau says of January. “It resolved itself in the first three weeks of January … the market went from pricing in a recession to saying, with all the stimulus, if we have a recession, it will be short and shallow.”
“The question is,” Gendreau said, “will the real market please stand up?”
For those of you keeping score at home, the S&P, which is widely viewed as a better reflection of the broader U.S. market, is down a record 7.7% for the month, more than twice what it gained in 2007. The last time the S&P posted such a hefty January loss was 1970, when Ronald Reagan was California’s governor and Richard Nixon was president. The index dropped 7.6% that month.
The tech-heavy Nasdaq, which has plunged 11.4% this year, is experiencing a little more déjà vu: The last time it started the year off with this big of a loss was 1990 when a man named George Bush lived at 1600 Pennsylvania Avenue and a politician named Clinton was getting ready to make a run for the White House. The Nasdaq fell 8.6% that month.
Energy, telecom and tech were among the sectors hardest hit in January to date, down 11%, 12% and 14%, respectively.
Gendreau says these sectors, which derive a large portion of their revenue from globalized trade, will reassert their leadership by year end. Specifically, he cites industrial, tech, material and energy stocks.
Oh, and just a fun little factoid: Historically, with the exception of 2001, legislation providing fiscal stimulus typically occurs in the last month of or several months after a recession.
Am I Diversified? - Cramer
Viewers called Cramer to find out if their portfolios were up to par for the new bull market. The first caller had Altria (MO - Cramer's Take - Stockpickr - Rating), Pfizer (PFE - Cramer's Take - Stockpickr - Rating), Apache (APA - Cramer's Take - Stockpickr - Rating), Citigroup (C - Cramer's Take - Stockpickr - Rating) and Mosaic (MOS - Cramer's Take - Stockpickr - Rating) as his top holdings. Cramer applauded the portfolio.
The second caller had Sirius Satellite (SIRI - Cramer's Take - Stockpickr - Rating), Caterpillar (CAT - Cramer's Take - Stockpickr - Rating), Mercadolibre (MELI - Cramer's Take - Stockpickr), Lowes (LOW - Cramer's Take - Stockpickr - Rating) and Sears Holding (SHLD - Cramer's Take - Stockpickr - Rating) as her top holdings. Cramer didn't like this portfolio. He said Sears and Lowes are competing companies, he would dump Lowes in favor of a medical company like Hologic (HOLX - Cramer's Take - Stockpickr).
The second caller had Sirius Satellite (SIRI - Cramer's Take - Stockpickr - Rating), Caterpillar (CAT - Cramer's Take - Stockpickr - Rating), Mercadolibre (MELI - Cramer's Take - Stockpickr), Lowes (LOW - Cramer's Take - Stockpickr - Rating) and Sears Holding (SHLD - Cramer's Take - Stockpickr - Rating) as her top holdings. Cramer didn't like this portfolio. He said Sears and Lowes are competing companies, he would dump Lowes in favor of a medical company like Hologic (HOLX - Cramer's Take - Stockpickr).
Wednesday, January 30, 2008
Market Spotlight: Fertilizer Companies
By Stan Choe, AP Business Writer
Analysts Say Same Trends That Propelled Fertilizer Stocks Last Year Remain in Place
NEW YORK (AP) -- Fertilizer companies were stinkers this year -- until recently.
Yet stocks in the sector were among last year's biggest gainers, and analysts believe the same trends that propelled them remain in place.
Grain prices are rising around the world as people in developing countries gain income and consume more meat. Livestock require feed, which boosts demand for fertilizer. Capacity, meanwhile, is relatively constrained.
"Growing food is not a luxury," said Goldman Sachs analyst Edlain Rodriguez. He likes Potash Corp. of Saskatchewan in particular. The company is the largest producer of potash -- a mineral used in fertilizer -- in the world and a major producer of nitrogen and phosphate products.
CIBC World Markets analyst Jacob Bout expects "continued strength in fertilizer demand as farmers look to increase yields in the face of historically high crop prices, resulting in strong... pricing." He marginally prefers Agrium Inc. over Potash, saying it's priced more attractively.
Potash Corp. saw its shares surge 200 percent in 2007. Through the first three weeks of 2008, though, its stock fell nearly 18 percent on fears that a recession would hurt demand.
An inventory report also raised fear of rising supply. But now, Potash's stock is down just 2.1 percent for the year, less than the broad market.
The company last week reported its fourth-quarter profit more than doubled to $376.8 million due to stronger prices for its nutrients. Potash forecasts 2008 profit will exceed 2007s, and Wall Street expectations, as robust global demand for agricultural products and fertilizers is expected to continue. It estimates 2008 shipments will rise 7 percent to both North American and offshore potash markets.
Citi Investment Research analyst Brian Yu said industry fundamentals are indeed strong, but shares have already rebounded, so it may be too late to buy in cheaply. He rates Potash "Hold," saying the shares look fairly valued.
Analysts Say Same Trends That Propelled Fertilizer Stocks Last Year Remain in Place
NEW YORK (AP) -- Fertilizer companies were stinkers this year -- until recently.
Yet stocks in the sector were among last year's biggest gainers, and analysts believe the same trends that propelled them remain in place.
Grain prices are rising around the world as people in developing countries gain income and consume more meat. Livestock require feed, which boosts demand for fertilizer. Capacity, meanwhile, is relatively constrained.
"Growing food is not a luxury," said Goldman Sachs analyst Edlain Rodriguez. He likes Potash Corp. of Saskatchewan in particular. The company is the largest producer of potash -- a mineral used in fertilizer -- in the world and a major producer of nitrogen and phosphate products.
CIBC World Markets analyst Jacob Bout expects "continued strength in fertilizer demand as farmers look to increase yields in the face of historically high crop prices, resulting in strong... pricing." He marginally prefers Agrium Inc. over Potash, saying it's priced more attractively.
Potash Corp. saw its shares surge 200 percent in 2007. Through the first three weeks of 2008, though, its stock fell nearly 18 percent on fears that a recession would hurt demand.
An inventory report also raised fear of rising supply. But now, Potash's stock is down just 2.1 percent for the year, less than the broad market.
The company last week reported its fourth-quarter profit more than doubled to $376.8 million due to stronger prices for its nutrients. Potash forecasts 2008 profit will exceed 2007s, and Wall Street expectations, as robust global demand for agricultural products and fertilizers is expected to continue. It estimates 2008 shipments will rise 7 percent to both North American and offshore potash markets.
Citi Investment Research analyst Brian Yu said industry fundamentals are indeed strong, but shares have already rebounded, so it may be too late to buy in cheaply. He rates Potash "Hold," saying the shares look fairly valued.
Jim Cramer on BG
Cramer added that playing the agriculture boom is still a smart move. "Oil's going to $100. ... I think you can still own Bunge (BG - Cramer's Take - Stockpickr - Rating) upgraded. ... Archer Daniels (ADM - Cramer's Take - Stockpickr - Rating) is good."
Tuesday, January 29, 2008
Chemical Group Adds Lobbyist to Equation
Chemical Companies Paid Holland & Knight $320,000 in 2007 to Lobby Government on Security
WASHINGTON (AP) -- The American Chemistry Council paid Holland & Knight LLP $160,000 in the second half of 2007 to lobby the federal government.
The firm lobbied on homeland security funding, security legislation related to chemical facilities, energy and environmental matters and other issues, according to a disclosure form posted online Monday by the Senate's public records office. The trade group paid the firm $160,000 in the first six months of 2007 to lobby on the same issues.
Karl Koch, who was chief of staff to former Rep. Jim Davis, D-Fla., and Kathryn Lehman, former chief of staff to the House Republican Conference, are among those registered to lobby for the trade group.
Besides Congress, the firm lobbied the Environmental Protection Agency and White House.
Lobbyists are required to disclose activities that could influence members of the executive and legislative branches, under a federal law enacted in 1995. They must register with Congress within 45 days of being hired or engaging in lobbying.
The trade group represents more than 130 companies, including Dow Chemical Co., Chemtura Corp. and Monsanto Co.
WASHINGTON (AP) -- The American Chemistry Council paid Holland & Knight LLP $160,000 in the second half of 2007 to lobby the federal government.
The firm lobbied on homeland security funding, security legislation related to chemical facilities, energy and environmental matters and other issues, according to a disclosure form posted online Monday by the Senate's public records office. The trade group paid the firm $160,000 in the first six months of 2007 to lobby on the same issues.
Karl Koch, who was chief of staff to former Rep. Jim Davis, D-Fla., and Kathryn Lehman, former chief of staff to the House Republican Conference, are among those registered to lobby for the trade group.
Besides Congress, the firm lobbied the Environmental Protection Agency and White House.
Lobbyists are required to disclose activities that could influence members of the executive and legislative branches, under a federal law enacted in 1995. They must register with Congress within 45 days of being hired or engaging in lobbying.
The trade group represents more than 130 companies, including Dow Chemical Co., Chemtura Corp. and Monsanto Co.
UPDATE 2-USTR Schwab urges EU to hasten biotech approvals
By Missy Ryan
WASHINGTON, Jan 29 (Reuters) - U.S. Trade Representative Susan Schwab on Tuesday pledged to watch for proof that the European Union is accelerating approval of new biotech products and ending a delay that has been costly to U.S. exporters.
Schwab declined to specify how long she might be willing to wait before she would ask the World Trade Organization to probe whether the EU is in violation of its ruling that found the 27-member bloc dragged its feet for years in approving new genetically modified food and crops.
"We have been tremendously frustrated at the lack of progress on the biotechnology issue," Schwab, who discussed the issue last week with European officials, told reporters.
"We need to see some progress," she said.
Earlier this month, Schwab's office announced it would give the EU more time to speed up its approval process and comply with the ruling.
The case has complicated trans-Atlantic ties for years, stunting export opportunities for U.S. farmers, who now rely on biotechnology for a huge share of farm production.
GMO crops, designed to withstand weed-killing agents or to repel pests, are commonly used in the United States, but European consumers have resisted them.
That process could ultimately lead to trade retaliation.
"Basically, it will be up to Europe to determine when or if the panel is ever formed," said Russell Williams, a biotechnology expert at the American Farm Bureau Federation, the largest U.S. farm group.
The Bush administration also has begun soliciting input about which EU products might be targeted for trade sanctions if the situation deteriorates.
As the EU promises to make changes to its approval process, the outlook is complicated by France's recent decision to extend an effective ban on the sole genetically modified crop now grown there, despite EU approval of the crop.
"We've been discouraged by some backsliding that we've seen on the part of France," Schwab said. The crop is called MON 810, a maize developed by the U.S. firm Monsanto (MON.N: Quote, Profile, Research).
France is one of several countries with bans in place in Europe.
Sharon Bomer Lauritsen, executive vice president for the Biotechnology Industry Organization, said the EU had made minor steps forward, approving four GM products in October, but pointed to over 40 other products awaiting approval.
Canada and Argentina also have challenged the EU process for approving GM products.
WASHINGTON, Jan 29 (Reuters) - U.S. Trade Representative Susan Schwab on Tuesday pledged to watch for proof that the European Union is accelerating approval of new biotech products and ending a delay that has been costly to U.S. exporters.
Schwab declined to specify how long she might be willing to wait before she would ask the World Trade Organization to probe whether the EU is in violation of its ruling that found the 27-member bloc dragged its feet for years in approving new genetically modified food and crops.
"We have been tremendously frustrated at the lack of progress on the biotechnology issue," Schwab, who discussed the issue last week with European officials, told reporters.
"We need to see some progress," she said.
Earlier this month, Schwab's office announced it would give the EU more time to speed up its approval process and comply with the ruling.
The case has complicated trans-Atlantic ties for years, stunting export opportunities for U.S. farmers, who now rely on biotechnology for a huge share of farm production.
GMO crops, designed to withstand weed-killing agents or to repel pests, are commonly used in the United States, but European consumers have resisted them.
That process could ultimately lead to trade retaliation.
"Basically, it will be up to Europe to determine when or if the panel is ever formed," said Russell Williams, a biotechnology expert at the American Farm Bureau Federation, the largest U.S. farm group.
The Bush administration also has begun soliciting input about which EU products might be targeted for trade sanctions if the situation deteriorates.
As the EU promises to make changes to its approval process, the outlook is complicated by France's recent decision to extend an effective ban on the sole genetically modified crop now grown there, despite EU approval of the crop.
"We've been discouraged by some backsliding that we've seen on the part of France," Schwab said. The crop is called MON 810, a maize developed by the U.S. firm Monsanto (MON.N: Quote, Profile, Research).
France is one of several countries with bans in place in Europe.
Sharon Bomer Lauritsen, executive vice president for the Biotechnology Industry Organization, said the EU had made minor steps forward, approving four GM products in October, but pointed to over 40 other products awaiting approval.
Canada and Argentina also have challenged the EU process for approving GM products.
Caterpillar a Popular Heavy Equipment Stock Among Pro Investors
By the BullMarket.com Staff
Heavy equipment makers enjoyed a robust 2007, buoyed by strong international demand for engines, tractors, bulldozers, and other machines needed in the construction and agriculture sectors. The big question today for heavy equipment makers is whether the economic clouds gathering in the U.S. will spread overseas and crimp demand for their products.
Despite the struggling housing market hurting demand for construction domestically, the agriculture, mining, and energy sectors, driven by robust commodity prices, have kept heavy equipment stocks on the rise over the last year.
More than a few Pro investors had stakes in heavy equipment makers in 2007. In particular, RH Bluestein & Co, an investment advisor with about $2.6 billion in assets under management as of July 2007, counted a pair of heavy equipment companies among its top-15, U.S.-listed equity holdings at the end of Q3. During Q3, the firm increased its stakes in both Caterpillar (NYSE: CAT - News) and Deere (NYSE: DE - News).
Deere wasn't the only agricultural stock in Bluestein's portfolio. The firm's largest equity holdings at the end of Q3 were in fertilizer firm Potash (NYSE: POT - News) and seed giant Monsanto (NYSE: MON - News). A list of the equities among Bluestein's top holdings is available at tickerspy.com.
The most popular heavy equipment stock among the Pros is Caterpillar, with 38 investment firms holding the stock at the end of Q3. Among the stock's biggest institutional holders was State Farm Mutual Automobile Insurance with 19.6 million shares. Caterpillar is also the favorite heavy equipment company among tickerspy.com members. Heavy equipment stocks also popular among tickerspy members include Cummins (NYSE: CMI - News) and CNH Global (NYSE: CNH - News).
Heavy equipment makers enjoyed a robust 2007, buoyed by strong international demand for engines, tractors, bulldozers, and other machines needed in the construction and agriculture sectors. The big question today for heavy equipment makers is whether the economic clouds gathering in the U.S. will spread overseas and crimp demand for their products.
Despite the struggling housing market hurting demand for construction domestically, the agriculture, mining, and energy sectors, driven by robust commodity prices, have kept heavy equipment stocks on the rise over the last year.
More than a few Pro investors had stakes in heavy equipment makers in 2007. In particular, RH Bluestein & Co, an investment advisor with about $2.6 billion in assets under management as of July 2007, counted a pair of heavy equipment companies among its top-15, U.S.-listed equity holdings at the end of Q3. During Q3, the firm increased its stakes in both Caterpillar (NYSE: CAT - News) and Deere (NYSE: DE - News).
Deere wasn't the only agricultural stock in Bluestein's portfolio. The firm's largest equity holdings at the end of Q3 were in fertilizer firm Potash (NYSE: POT - News) and seed giant Monsanto (NYSE: MON - News). A list of the equities among Bluestein's top holdings is available at tickerspy.com.
The most popular heavy equipment stock among the Pros is Caterpillar, with 38 investment firms holding the stock at the end of Q3. Among the stock's biggest institutional holders was State Farm Mutual Automobile Insurance with 19.6 million shares. Caterpillar is also the favorite heavy equipment company among tickerspy.com members. Heavy equipment stocks also popular among tickerspy members include Cummins (NYSE: CMI - News) and CNH Global (NYSE: CNH - News).
Monday, January 28, 2008
AG Stocks - Support Levels
Courstesy barchart.com
MOS- $86.90
POT - $125.39
MON - $102.89
AGU - $57.93
TNH - $127.32
TRA - $42.89
BG - $111.07
DE -$79.90
CF - $97.44
MOS- $86.90
POT - $125.39
MON - $102.89
AGU - $57.93
TNH - $127.32
TRA - $42.89
BG - $111.07
DE -$79.90
CF - $97.44
Bunge Shares Rise
Bunge Stock Rises After Morgan Stanley Analyst Says Investors Underestimate Profit Potential
NEW YORK (AP) -- Bunge Ltd. stock rose Monday after a Morgan Stanley analyst upgraded it to "Overweight," saying investors have underestimated the company's potential in the growing worldwide agricultural market.
The agricultural company's shares rose $4.53, or 4 percent, to $117.42 in afternoon trading.
Analyst Vincent Andrews said he expects a "dramatic upswing" in Bunge's fertilizer profits and a "a sustainable step-change" in its agribusiness segment this year. Agribusiness relates to buying, storing, transporting, processing and selling grains and oilseeds.
Investors should be "aggressive buyers" on any stock-price weakness related to Bunge's outlook, to be released on Feb. 7. He expects that management's outlook issued during the third-quarter conference call was "somewhat conservative" and will be better this time around
NEW YORK (AP) -- Bunge Ltd. stock rose Monday after a Morgan Stanley analyst upgraded it to "Overweight," saying investors have underestimated the company's potential in the growing worldwide agricultural market.
The agricultural company's shares rose $4.53, or 4 percent, to $117.42 in afternoon trading.
Analyst Vincent Andrews said he expects a "dramatic upswing" in Bunge's fertilizer profits and a "a sustainable step-change" in its agribusiness segment this year. Agribusiness relates to buying, storing, transporting, processing and selling grains and oilseeds.
Investors should be "aggressive buyers" on any stock-price weakness related to Bunge's outlook, to be released on Feb. 7. He expects that management's outlook issued during the third-quarter conference call was "somewhat conservative" and will be better this time around
CF Industries earnings call
CF Industries Holdings, Inc. Announces Dates for Fourth Quarter and Full Year 2007 Results and Conference Call
Company Will Report Results on February 7, 2008 and Hold Conference Call on February 8, 2008
CF Industries Holdings, Inc., headquartered in Deerfield, Illinois, is the holding company for the operations of CF Industries, Inc. CF Industries, Inc. is a major producer and distributor of nitrogen and phosphate fertilizer products. CF Industries operates world-scale nitrogen fertilizer plants in Donaldsonville, Louisiana and Medicine Hat, Alberta, Canada; conducts phosphate mining and manufacturing operations in Central Florida; and distributes fertilizer products through a system of terminals, warehouses, and associated transportation equipment located primarily in the midwestern United States. The company also owns a 50 percent interest in KEYTRADE AG, a global fertilizer trading organization headquartered near Zurich, Switzerland.
Company Will Report Results on February 7, 2008 and Hold Conference Call on February 8, 2008
CF Industries Holdings, Inc., headquartered in Deerfield, Illinois, is the holding company for the operations of CF Industries, Inc. CF Industries, Inc. is a major producer and distributor of nitrogen and phosphate fertilizer products. CF Industries operates world-scale nitrogen fertilizer plants in Donaldsonville, Louisiana and Medicine Hat, Alberta, Canada; conducts phosphate mining and manufacturing operations in Central Florida; and distributes fertilizer products through a system of terminals, warehouses, and associated transportation equipment located primarily in the midwestern United States. The company also owns a 50 percent interest in KEYTRADE AG, a global fertilizer trading organization headquartered near Zurich, Switzerland.
Friday, January 25, 2008
Indian Shares Soar Amid Global Rally
MUMBAI, India (AP) -- Indian shares soared Friday with the benchmark index rising more than 6 percent, tracking rallies in global markets.
The 30-company benchmark index of the Bombay Stock Exchange, the Sensex, rose as much as 1,158.85 points, or 6.73 percent, to 18,380.59 at the provisional close.
On the rival National Stock Exchange, the 50-share S&P Nifty index was up 6.97 percent at 5,384.45 points at the provisional close.
Analysts said renewed fund buying had boosted the markets.
Among the main gainers were power utility Reliance Energy Ltd., followed by oil company Oil & Natural Gas Corp., or ONGC, and leading bank ICICI Bank Ltd.
Indian markets received a pounding this week with a reprieve Wednesday when the Sensex rebounded after plunging 5 percent Tuesday and sinking as much 7.4 percent on Monday, its second-biggest percentage loss ever.
The market bounced back strongly Wednesday before slipping 2.1 percent Thursday.
The 30-company benchmark index of the Bombay Stock Exchange, the Sensex, rose as much as 1,158.85 points, or 6.73 percent, to 18,380.59 at the provisional close.
On the rival National Stock Exchange, the 50-share S&P Nifty index was up 6.97 percent at 5,384.45 points at the provisional close.
Analysts said renewed fund buying had boosted the markets.
Among the main gainers were power utility Reliance Energy Ltd., followed by oil company Oil & Natural Gas Corp., or ONGC, and leading bank ICICI Bank Ltd.
Indian markets received a pounding this week with a reprieve Wednesday when the Sensex rebounded after plunging 5 percent Tuesday and sinking as much 7.4 percent on Monday, its second-biggest percentage loss ever.
The market bounced back strongly Wednesday before slipping 2.1 percent Thursday.
Recessions: They're Not So Bad
Did you know historically the S&P has jumped big time in the period immeidately following a recession? Specifically, during a recession the S&P remains unchanged but in the six months after a recession it explodes, explains Dylan Ratigan, charging 12% higher on average.
If we’re in a recession, I think investors ought to be in consumer staples, healthcare and material stocks says Jon Najarian. Here’s why.
SECTORS DURING RECESSION (RELATIVE TO S&P 500)
Sector ETF % Change
Health Care XLV +5%
Materials XLB +2%
Consumer Staples XLP +10%
Source: Birinyi Associates
Also, have some put protection in place along with owning the underlying stocks, Najarian counsels. And even if the recession doesn't play out names that I think will perform well either way include Merck (MRK), Dow Chemical (DOW), Monsanto (MON) and Procter & Gamble (PG).
I agree, says Guy Adami, of course it depends on where we are in the cycle. It’s quite possible that by spring Monsanto, as well as Freeport McMoRan (FCX) and Potash (POT) could all go a lot higher...from cnbc.com
If we’re in a recession, I think investors ought to be in consumer staples, healthcare and material stocks says Jon Najarian. Here’s why.
SECTORS DURING RECESSION (RELATIVE TO S&P 500)
Sector ETF % Change
Health Care XLV +5%
Materials XLB +2%
Consumer Staples XLP +10%
Source: Birinyi Associates
Also, have some put protection in place along with owning the underlying stocks, Najarian counsels. And even if the recession doesn't play out names that I think will perform well either way include Merck (MRK), Dow Chemical (DOW), Monsanto (MON) and Procter & Gamble (PG).
I agree, says Guy Adami, of course it depends on where we are in the cycle. It’s quite possible that by spring Monsanto, as well as Freeport McMoRan (FCX) and Potash (POT) could all go a lot higher...from cnbc.com
China Power
As Western markets wilt, should you look to the East for powerful economic growth?
Now is the time to think about loading up on China, says Tim Seymour. At this point in time China’s export market to the US is not that meaningful. In other words, if the US goes into a recession, exports won’t drop enough in China to make a significant difference to its economy.
If you buy Tim Seymour’s thesis, then buy the agriculture names says Pete Najarian. Look at Mosaic (MOS), Monsanto (MON) or even Dupont (DD), he says.
Karen Finerman doesn’t buy it. If the US slows down it’s going to hurt China, she counters.
from cnbc.com
Now is the time to think about loading up on China, says Tim Seymour. At this point in time China’s export market to the US is not that meaningful. In other words, if the US goes into a recession, exports won’t drop enough in China to make a significant difference to its economy.
If you buy Tim Seymour’s thesis, then buy the agriculture names says Pete Najarian. Look at Mosaic (MOS), Monsanto (MON) or even Dupont (DD), he says.
Karen Finerman doesn’t buy it. If the US slows down it’s going to hurt China, she counters.
from cnbc.com
Thursday, January 24, 2008
Fitz Bits:ByDan Fitzpatrick, RealMoney.com Contributor
Monsanto is creating a new trading range with $95 as support and the 50-day moving average as resistance. And with the stock nearing the top of that range, I'd be watching for a breakout above $105 as a buy signal indicating a washout of momentum traders.
Potash Corp. 4Q Profit More Than Doubles
Potash Corp. of Saskatchewan 4th-Quarter Profit Beats Analysts' Estimates on High Demand
NEW YORK (AP) -- Canadian fertilizer maker Potash Corp. of Saskatchewan Inc. said Thursday its 2007 fourth-quarter profit more than doubled, beating Wall Street's expectations, as strong global demand for fertilizers led to significant price increases.
The company reported income of $376.8 million, or $1.16 per share, compared with $186 million, or 58 cents per share, in the year-ago period.
Revenue rose 40 percent to $1.43 billion from $1.02 billion in the fourth quarter of 2006.
Analysts polled by Thomson Financial, on average, estimated earnings of 98 cents per share on sales of $1.24 billion.
Agricultural commodity prices continued to rise during the quarter, providing farmers with the ability to increase fertilizer use to achieve higher yields, the company said.
The growth in demand led to price increases, especially for potash. The phosphate market also saw significant price increases, Saskatoon, Saskatchewan-based Potash Corp. said, in response to tight inventories, strong demand and rising input costs. Global demand for nitrogen also grew, and U.S. prices remained high.
Results were also boosted by a favorable tax rate that reduced the company's income-tax expense by 14 cents per share in the quarter. Offshore investments in Arab Potash Co., Sociedad Quimica y Minera de Chile SA and Israel Chemicals Ltd. added $28.6 million in other income to the company's fourth-quarter results.
For the full year, Potash Corp. reported income of $1.1 billion, or $3.40 per share, compared with $631.8 million, or $1.98 per share, in 2006. Total sales jumped 39 percent in 2007 to $5.23 billion from $3.77 billion in the prior year.
NEW YORK (AP) -- Canadian fertilizer maker Potash Corp. of Saskatchewan Inc. said Thursday its 2007 fourth-quarter profit more than doubled, beating Wall Street's expectations, as strong global demand for fertilizers led to significant price increases.
The company reported income of $376.8 million, or $1.16 per share, compared with $186 million, or 58 cents per share, in the year-ago period.
Revenue rose 40 percent to $1.43 billion from $1.02 billion in the fourth quarter of 2006.
Analysts polled by Thomson Financial, on average, estimated earnings of 98 cents per share on sales of $1.24 billion.
Agricultural commodity prices continued to rise during the quarter, providing farmers with the ability to increase fertilizer use to achieve higher yields, the company said.
The growth in demand led to price increases, especially for potash. The phosphate market also saw significant price increases, Saskatoon, Saskatchewan-based Potash Corp. said, in response to tight inventories, strong demand and rising input costs. Global demand for nitrogen also grew, and U.S. prices remained high.
Results were also boosted by a favorable tax rate that reduced the company's income-tax expense by 14 cents per share in the quarter. Offshore investments in Arab Potash Co., Sociedad Quimica y Minera de Chile SA and Israel Chemicals Ltd. added $28.6 million in other income to the company's fourth-quarter results.
For the full year, Potash Corp. reported income of $1.1 billion, or $3.40 per share, compared with $631.8 million, or $1.98 per share, in 2006. Total sales jumped 39 percent in 2007 to $5.23 billion from $3.77 billion in the prior year.
Potash Corp. to Buy Back 5 Pct of Shares
Potash Corp. of Saskatchewan Inc. to Repurchase Up to 15.8 Million Shares Over One-Year Period
NEW YORK (AP) -- Potash Corp. of Saskatchewan Inc., a Canadian fertilizer maker, said Wednesday its board approved the repurchase of up to 15.8 million shares, or about 5 percent of its outstanding common stock, over a one-year period.
As of Dec. 31, the company had 316.4 million shares outstanding.
Potash Corp. shares jumped $7.85, or 6.5 percent, to $128 in premarket trading.
NEW YORK (AP) -- Potash Corp. of Saskatchewan Inc., a Canadian fertilizer maker, said Wednesday its board approved the repurchase of up to 15.8 million shares, or about 5 percent of its outstanding common stock, over a one-year period.
As of Dec. 31, the company had 316.4 million shares outstanding.
Potash Corp. shares jumped $7.85, or 6.5 percent, to $128 in premarket trading.
Potash Corp profit jumps, CEO downplays recession
By Roberta Rampton
WINNIPEG, Manitoba (Reuters) - Potash Corp of Saskatchewan (POT.TO: Quote, Profile, Research) reported a steep rise in fourth quarter profits on Thursday, and its stock jumped more than 6 percent on the healthy figure and a rosy 2008 forecast.
The world's largest fertilizer producer said it expected bigger profits in the year ahead, and its chief executive shrugged off concerns about a downturn in the U.S. economy.
Bill Doyle said the growing world appetite for protein-rich diets amid dangerously tight global grain stocks would continue to push record crop prices higher, spurring fertilizer use.
"That switch (in diets) is so fundamental that it would take a global depression to upset the apple cart. And that's what a lot of people don't understand," Doyle told Reuters.
Saskatoon, Saskatchewan-based Potash said its fourth-quarter profit doubled to $376.8 million, or $1.16 a share, up from $186 million, or 58 cents a share, helped by surging prices and a cut to its income tax rate.
That beat average analyst expectations of 97 cents a share, as polled by Reuters Estimates.
Potash stock closed C$8.05 higher at C$129.93 on the Toronto Stock Exchange and up $9.08 at $129.10 in New York.
Potash, a stock market darling for more than a year, has been caught up in volatile markets, dropping as much as 30 percent from its last week's high.
But Doyle told analysts the company was not shaken. It plans to buy back about 5 percent or up to 15.82 million of its outstanding shares over the next year.
Those shares were worth C$1.93 billion before trading began in Toronto on Thursday.
"What happened these last seven or eight trading sessions was just so ridiculous that we felt, if people are foolish enough to want to sell the stock at a cheap price, then we'll take it from them," Doyle said in an interview.
He also brushed off concerns about a year-end potash inventory build-up as "poppycock," saying supplies were tight.
Doyle said he expected first-quarter results ranging from $1.30 to $1.60 per share and net income for the full year in the range of $6.25 to $7.25 per share.
"We're going to have sensational earnings here in 2008, and people will see it as the year goes on, so these (economic fears) are very short-term factors," he said in an interview.
Potash said income tax expenses were reduced by 14 cents per share for the quarter. In October, the company had reported a 3-percentage-point hike to its income tax rate, to 33 percent, but that has been reversed back to 30 percent.
Fourth-quarter sales for the Saskatoon, Saskatchewan-based company were $1.43 billion, up 40 percent from $1.022 billion for the same time last year.
Spot prices to Brazil and southeast Asia have soared to $525 per tonne, and could continue to climb, Doyle said.
Much depends how much prices are hiked in annual contract negotiations with China, the world's largest potash importer, which Doyle said he expects will conclude by early April.
China has been paying about $225 per tonne for delivered potash through 2007, he said.
"The Chinese deserve a discount, but not that big a discount," he said, noting producers are in a strong position.
"We won't miss a beat without China in the first quarter because we're sold out," Doyle said.
($1=$1.01 Canadian)
(Reporting by Roberta Rampton and Scott Anderson; editing by Janet Guttsman)
WINNIPEG, Manitoba (Reuters) - Potash Corp of Saskatchewan (POT.TO: Quote, Profile, Research) reported a steep rise in fourth quarter profits on Thursday, and its stock jumped more than 6 percent on the healthy figure and a rosy 2008 forecast.
The world's largest fertilizer producer said it expected bigger profits in the year ahead, and its chief executive shrugged off concerns about a downturn in the U.S. economy.
Bill Doyle said the growing world appetite for protein-rich diets amid dangerously tight global grain stocks would continue to push record crop prices higher, spurring fertilizer use.
"That switch (in diets) is so fundamental that it would take a global depression to upset the apple cart. And that's what a lot of people don't understand," Doyle told Reuters.
Saskatoon, Saskatchewan-based Potash said its fourth-quarter profit doubled to $376.8 million, or $1.16 a share, up from $186 million, or 58 cents a share, helped by surging prices and a cut to its income tax rate.
That beat average analyst expectations of 97 cents a share, as polled by Reuters Estimates.
Potash stock closed C$8.05 higher at C$129.93 on the Toronto Stock Exchange and up $9.08 at $129.10 in New York.
Potash, a stock market darling for more than a year, has been caught up in volatile markets, dropping as much as 30 percent from its last week's high.
But Doyle told analysts the company was not shaken. It plans to buy back about 5 percent or up to 15.82 million of its outstanding shares over the next year.
Those shares were worth C$1.93 billion before trading began in Toronto on Thursday.
"What happened these last seven or eight trading sessions was just so ridiculous that we felt, if people are foolish enough to want to sell the stock at a cheap price, then we'll take it from them," Doyle said in an interview.
He also brushed off concerns about a year-end potash inventory build-up as "poppycock," saying supplies were tight.
Doyle said he expected first-quarter results ranging from $1.30 to $1.60 per share and net income for the full year in the range of $6.25 to $7.25 per share.
"We're going to have sensational earnings here in 2008, and people will see it as the year goes on, so these (economic fears) are very short-term factors," he said in an interview.
Potash said income tax expenses were reduced by 14 cents per share for the quarter. In October, the company had reported a 3-percentage-point hike to its income tax rate, to 33 percent, but that has been reversed back to 30 percent.
Fourth-quarter sales for the Saskatoon, Saskatchewan-based company were $1.43 billion, up 40 percent from $1.022 billion for the same time last year.
Spot prices to Brazil and southeast Asia have soared to $525 per tonne, and could continue to climb, Doyle said.
Much depends how much prices are hiked in annual contract negotiations with China, the world's largest potash importer, which Doyle said he expects will conclude by early April.
China has been paying about $225 per tonne for delivered potash through 2007, he said.
"The Chinese deserve a discount, but not that big a discount," he said, noting producers are in a strong position.
"We won't miss a beat without China in the first quarter because we're sold out," Doyle said.
($1=$1.01 Canadian)
(Reporting by Roberta Rampton and Scott Anderson; editing by Janet Guttsman)
Wednesday, January 23, 2008
Monsanto Direcotor Buys Shares
Monsanto Director William U. Parfet Buys 10,300 Shares
NEW YORK (AP) -- A director of agricultural products company Monsanto Co. bought 10,300 shares of common stock, according to a Securities and Exchange Commission filing Tuesday.
In a Form 4 filed with the SEC, William U. Parfet reported he bought the shares for $99.94 apiece.
Insiders file Form 4s with the SEC to report transactions in their companies' shares. Open market purchases and sales must be reported within two business days of the transaction.
Monsanto is based in St. Louis.
NEW YORK (AP) -- A director of agricultural products company Monsanto Co. bought 10,300 shares of common stock, according to a Securities and Exchange Commission filing Tuesday.
In a Form 4 filed with the SEC, William U. Parfet reported he bought the shares for $99.94 apiece.
Insiders file Form 4s with the SEC to report transactions in their companies' shares. Open market purchases and sales must be reported within two business days of the transaction.
Monsanto is based in St. Louis.
Deere shares bounce back from 10% drop
Shares of heavy-equipment maker Deere & Co. recovered from a major fall in trading Wednesday, following along with an overall market recovery in the afternoon.
The stock price for Deere (NYSE: DE - News), whose consumer arm is based in Cary, was down more than 10 percent in early-afternoon trading. Investors had been spooked by a statement from farm-equipment maker CNH Global NV, which said it expects overall North American sales of farm machinery to drop by as much as 10 percent in 2008.
But as the markets gained steam throughout the afternoon, Deere stock rose. It closed down only 0.25 percent, to $82.94.
Shares of Deere rival Caterpillar (NYSE: CAT - News), which also has a major Triangle presence, were also down earlier in the day, though they finished up 2 percent, to $65.08.
The 30-stock Dow Jones Industrial Average, which includes both Deere and Caterpillar, finished up nearly 300 points, or 2.5 percent, at 12,270. A late-afternoon rally put U.S. markets in the black for the first time in six days.
The stock price for Deere (NYSE: DE - News), whose consumer arm is based in Cary, was down more than 10 percent in early-afternoon trading. Investors had been spooked by a statement from farm-equipment maker CNH Global NV, which said it expects overall North American sales of farm machinery to drop by as much as 10 percent in 2008.
But as the markets gained steam throughout the afternoon, Deere stock rose. It closed down only 0.25 percent, to $82.94.
Shares of Deere rival Caterpillar (NYSE: CAT - News), which also has a major Triangle presence, were also down earlier in the day, though they finished up 2 percent, to $65.08.
The 30-stock Dow Jones Industrial Average, which includes both Deere and Caterpillar, finished up nearly 300 points, or 2.5 percent, at 12,270. A late-afternoon rally put U.S. markets in the black for the first time in six days.
IBD's Top 10 - Wednesday
CNH Falls Short, Warns On 2008
10 The farm machinery maker's Q4 profit rose 28% to 50 cents a share ex items, but that missed views by a dime. Revenue rose 35% to $4.33 bil above views. CNH Global (NYSE:CNH - News) expects North American sales of farm machinery to drop by as much as 10% in '08. CNH shares tumbled 16%. Rival Deere (NYSE:DE - News) sold off hard, but rallied with the market to close down 21 cents to 82.94.
10 The farm machinery maker's Q4 profit rose 28% to 50 cents a share ex items, but that missed views by a dime. Revenue rose 35% to $4.33 bil above views. CNH Global (NYSE:CNH - News) expects North American sales of farm machinery to drop by as much as 10% in '08. CNH shares tumbled 16%. Rival Deere (NYSE:DE - News) sold off hard, but rallied with the market to close down 21 cents to 82.94.
'Fast Money' Recap: Looking for the Bottom
Dennis Gartman Speaks
Dennis Gartman, author of The Gartman Letter, joined the "Fast Money" crew to discuss his take on the markets. Gartman predicts Wednesday morning will be ugly off the back of disappointing expectations from Apple (AAPL - Cramer's Take - Stockpickr). He disclosed he is short Research In Motion (RIMM - Cramer's Take - Stockpickr). Gartman doesn't think the bear market is over yet. He explained that bear markets rarely end with "V" bottoms. He disclosed he is short on balance, long agriculture and gold. Gartman is also looking to buy Potash (POT - Cramer's Take - Stockpickr) and he will continue to own wheat, corn and soybeans. He advises selling high tech and steel. Finally, Gartman declared that the US is in a recession and has been since the third quarter of 2007.
Dennis Gartman, author of The Gartman Letter, joined the "Fast Money" crew to discuss his take on the markets. Gartman predicts Wednesday morning will be ugly off the back of disappointing expectations from Apple (AAPL - Cramer's Take - Stockpickr). He disclosed he is short Research In Motion (RIMM - Cramer's Take - Stockpickr). Gartman doesn't think the bear market is over yet. He explained that bear markets rarely end with "V" bottoms. He disclosed he is short on balance, long agriculture and gold. Gartman is also looking to buy Potash (POT - Cramer's Take - Stockpickr) and he will continue to own wheat, corn and soybeans. He advises selling high tech and steel. Finally, Gartman declared that the US is in a recession and has been since the third quarter of 2007.
Tuesday, January 22, 2008
DuPont posts higher profit before special items
NEW YORK (Reuters) - U.S. chemical major DuPont Co (NYSE:DD - News) said on Tuesday that fourth-quarter earnings rose before special items, helped by increased profits from its performance materials business and strong agricultural sales in Brazil.
However, net income fell to $545 million, or 60 cents a share, from a year-earlier profit of $871 million, or 94 cents a share, which included tax benefits and insurance recoveries.
Excluding items, the company posted quarterly earnings of 57 cents a share, up from 45 cents a year earlier.
Analysts, on average, had forecast earnings of 50 cents a share, according to Reuters Estimates. But some analysts did note that a lower-than-expected tax rate added 5 cents a share to earnings in the quarter.
"Results (from) each of the five operating units were better than expected, most notably in Ag and Performance Materials," JPMorgan analyst Jeffrey Zekauskas said in a note to clients.
Sales in the quarter rose 11 percent to $6.98 billion, boosted by increased volumes and higher local selling prices. Wall Street had forecast sales of $6.69 billion.
"DuPont's strong earnings growth in the fourth quarter reflects our global presence," Chief Executive Charles Holliday said in a statement.
Shares of DuPont, which is a component of the Dow Jones industrial average (DJI:^DJI - News), rose 37 cents to $43.07 in morning trading on the New York Stock Exchange.
AG, PERFORMANCE MATERIALS SHINE
DuPont posted a 23 percent increase in sales from its agriculture business in the quarter, primarily driven by strong seed sales in Brazil.
The business though posted a seasonal pretax operating loss of $89 million, compared with a loss of $148 million a year ago.
Earlier this month, the Wilmington, Delaware-based company's shares rose when it increased its 2008 earnings forecast on higher sales from agricultural products in emerging markets.
Growing global appetite for agricultural products -- including the surging demand for corn from U.S. ethanol producers -- has helped DuPont and its peer Monsanto Co (NYSE:MON - News) post bumper seed sales in recent quarters.
On a conference call, Holliday said the company will also be looking at making some acquisitions this year to boost its biotech and seed offerings.
The performance materials business showed a 54 percent gain in pretax operating income that was spurred by increased polymer sales to the automobile, electronics and packaging industries.
The unit posted quarterly operating income of $186 million, compared with $121 million a year ago.
The main takeaway from DuPont's results, is the company's ability to offset slower end-market growth in the United States through its exposure to the faster-growth markets in Asia and Latin America, according to HSBC analyst Hassan Ahmed.
Holliday said sales from new product offerings and strong overseas growth continued to boost results despite the slowdown in U.S. housing and auto markets.
POSITIVE OUTLOOK
DuPont said it expected first-quarter earnings of $1.12 to $1.17 a share, and it affirmed its full-year earnings outlook of $3.35 to $3.55 a share.
Wall Street has forecast first-quarter earnings of $1.12 a share and full year 2008 earnings of $3.42 a share.
"We are confident we can deliver attractive growth in earnings in 2008, and see even stronger growth in the years to follow," Holliday said in a statement.
However, the company's shares are down 13.5 percent over the last three months, while the Standard & Poor's Chemical's Index (^GSPPM - News) has fallen 11.1 percent during the period.
(Reporting by Euan Rocha; Editing by Lisa Von Ahn and
However, net income fell to $545 million, or 60 cents a share, from a year-earlier profit of $871 million, or 94 cents a share, which included tax benefits and insurance recoveries.
Excluding items, the company posted quarterly earnings of 57 cents a share, up from 45 cents a year earlier.
Analysts, on average, had forecast earnings of 50 cents a share, according to Reuters Estimates. But some analysts did note that a lower-than-expected tax rate added 5 cents a share to earnings in the quarter.
"Results (from) each of the five operating units were better than expected, most notably in Ag and Performance Materials," JPMorgan analyst Jeffrey Zekauskas said in a note to clients.
Sales in the quarter rose 11 percent to $6.98 billion, boosted by increased volumes and higher local selling prices. Wall Street had forecast sales of $6.69 billion.
"DuPont's strong earnings growth in the fourth quarter reflects our global presence," Chief Executive Charles Holliday said in a statement.
Shares of DuPont, which is a component of the Dow Jones industrial average (DJI:^DJI - News), rose 37 cents to $43.07 in morning trading on the New York Stock Exchange.
AG, PERFORMANCE MATERIALS SHINE
DuPont posted a 23 percent increase in sales from its agriculture business in the quarter, primarily driven by strong seed sales in Brazil.
The business though posted a seasonal pretax operating loss of $89 million, compared with a loss of $148 million a year ago.
Earlier this month, the Wilmington, Delaware-based company's shares rose when it increased its 2008 earnings forecast on higher sales from agricultural products in emerging markets.
Growing global appetite for agricultural products -- including the surging demand for corn from U.S. ethanol producers -- has helped DuPont and its peer Monsanto Co (NYSE:MON - News) post bumper seed sales in recent quarters.
On a conference call, Holliday said the company will also be looking at making some acquisitions this year to boost its biotech and seed offerings.
The performance materials business showed a 54 percent gain in pretax operating income that was spurred by increased polymer sales to the automobile, electronics and packaging industries.
The unit posted quarterly operating income of $186 million, compared with $121 million a year ago.
The main takeaway from DuPont's results, is the company's ability to offset slower end-market growth in the United States through its exposure to the faster-growth markets in Asia and Latin America, according to HSBC analyst Hassan Ahmed.
Holliday said sales from new product offerings and strong overseas growth continued to boost results despite the slowdown in U.S. housing and auto markets.
POSITIVE OUTLOOK
DuPont said it expected first-quarter earnings of $1.12 to $1.17 a share, and it affirmed its full-year earnings outlook of $3.35 to $3.55 a share.
Wall Street has forecast first-quarter earnings of $1.12 a share and full year 2008 earnings of $3.42 a share.
"We are confident we can deliver attractive growth in earnings in 2008, and see even stronger growth in the years to follow," Holliday said in a statement.
However, the company's shares are down 13.5 percent over the last three months, while the Standard & Poor's Chemical's Index (^GSPPM - News) has fallen 11.1 percent during the period.
(Reporting by Euan Rocha; Editing by Lisa Von Ahn and
Terra Industries Earnings Conference Call (Q4 2007)
Scheduled to start Thu, Feb 7, 2008, 3:00 pm Eastern
Terra Industries, Inc., together with its subsidiaries, engages in the production and marketing of nitrogen and methanol products for agricultural and industrial markets in the United States, Canada, and the United Kingdom. It operates in two segments, Nitrogen and Methanol. The Nitrogen segment offers fertilizers, such as anhydrous ammonia, urea ammonium nitrate solutions, ammonium nitrate, and urea, as well as nitric acid, carbon dioxide, and dinitrogen tetroxide. The Methanol segment manufactures methanol, which is used as a raw material in the production of various chemical derivatives, as well as in the production of methyl tertiary butyl ether (MTBE), an oxygenate and octane enhancer for gasoline. Terra Industries sells its products to national agricultural retail chains, farm cooperatives, independent dealers, and industrial customers. The company was founded in 1964 and is headquartered in Sioux City, Iowa.
Terra Industries, Inc., together with its subsidiaries, engages in the production and marketing of nitrogen and methanol products for agricultural and industrial markets in the United States, Canada, and the United Kingdom. It operates in two segments, Nitrogen and Methanol. The Nitrogen segment offers fertilizers, such as anhydrous ammonia, urea ammonium nitrate solutions, ammonium nitrate, and urea, as well as nitric acid, carbon dioxide, and dinitrogen tetroxide. The Methanol segment manufactures methanol, which is used as a raw material in the production of various chemical derivatives, as well as in the production of methyl tertiary butyl ether (MTBE), an oxygenate and octane enhancer for gasoline. Terra Industries sells its products to national agricultural retail chains, farm cooperatives, independent dealers, and industrial customers. The company was founded in 1964 and is headquartered in Sioux City, Iowa.
Sector Glance: Heavy Equipment
Heavy-Equipment Shares Tumble As Fed Decision to Cut Interest Rates Fails to Stop Dow Drop
NEW YORK (AP) -- Shares of a variety of heavy-equipment companies tumbled Tuesday, along with the broader market, as a decision by the Federal Reserve to cut a key interest rate failed to ward off worries of a U.S. recession.
The Dow Jones industrial average plunged 400 points in early trading to 11,698. It last was below 12,000 in March 2007.
The Fed's decision to cut its federal funds rate to 3.5 percent and the discount rate, the interest it charges to lend directly to banks, came a week before the central bank's regularly scheduled meeting.
Here's how heavy-equipment stocks traded Tuesday morning:
Caterpillar Inc. fell 80 cents to $62.01.
Deere & Co. fell $1.21 to $75.19.
Terex Corp. fell $2.28, or 4.5 percent, to $48.64.
Manitowoc Co. fell $2.42, or 6.8 percent, to $33.18.
Illinois Tools Works Inc. fell 10 cents to $47.05.
Astec Industries Inc. rose 18 cents to $27.13.
Agco Corp. fell $2.28, or 3.9 percent, to $55.53.
NEW YORK (AP) -- Shares of a variety of heavy-equipment companies tumbled Tuesday, along with the broader market, as a decision by the Federal Reserve to cut a key interest rate failed to ward off worries of a U.S. recession.
The Dow Jones industrial average plunged 400 points in early trading to 11,698. It last was below 12,000 in March 2007.
The Fed's decision to cut its federal funds rate to 3.5 percent and the discount rate, the interest it charges to lend directly to banks, came a week before the central bank's regularly scheduled meeting.
Here's how heavy-equipment stocks traded Tuesday morning:
Caterpillar Inc. fell 80 cents to $62.01.
Deere & Co. fell $1.21 to $75.19.
Terex Corp. fell $2.28, or 4.5 percent, to $48.64.
Manitowoc Co. fell $2.42, or 6.8 percent, to $33.18.
Illinois Tools Works Inc. fell 10 cents to $47.05.
Astec Industries Inc. rose 18 cents to $27.13.
Agco Corp. fell $2.28, or 3.9 percent, to $55.53.
Monday, January 21, 2008
Ag Stocks Are Twice-Blessed
What makes so many of the day-to-day crowd of traders sick is the endless run in the same names: Agrium (AGU - Cramer's Take - Stockpickr - Rating), Monsanto (MON - Cramer's Take - Stockpickr), Mosaic (MOS - Cramer's Take - Stockpickr - Rating), Deere (DE - Cramer's Take - Stockpickr - Rating), Potash (POT - Cramer's Take - Stockpickr - Rating), Bunge (BG - Cramer's Take - Stockpickr - Rating), Syngenta (SYNT - Cramer's Take - Stockpickr - Rating) and Archer Daniels (ADM - Cramer's Take - Stockpickr - Rating).
It makes people sick to buy the same names over and over again.
Read the entire story and watch a Cramer video at
http://www.thestreet.com/_yahoo/newsanalysis/investing/10399177.html?cm_ven=YAHOO&cm_cat=FREE&cm_ite=NA
It makes people sick to buy the same names over and over again.
Read the entire story and watch a Cramer video at
http://www.thestreet.com/_yahoo/newsanalysis/investing/10399177.html?cm_ven=YAHOO&cm_cat=FREE&cm_ite=NA
Friday, January 18, 2008
Monsanto stock takes a plunge
Agriculture stocks like Monsanto (MON), Deere (DE) and Bunge (BG) are in free fall for a second straight day on no apparent news. The declines are hardly shocking, coming as they do just days after the stocks hit 52-week highs. Still, how often do you find stocks of this size falling between 6 percent and 10 percent for no apparent reason? At The Wall Street Journal, Scott Patterson surmises that the action is being driven by an exchange-traded fund called Market Vectors Global Agribusiness, which sports the ticker MOO. He also says the selloff started with the release of weak manufacturing data that could point to reduced demand for ethanol, which has been the bull-market story behind much of the rise in these stocks. Regardless of the action in its stock - which at a recent $101 has lost a quarter of its value over two days - Monsanto believes the future is very bright indeed for its genetically engineered crops business, the one dubbed Frankenfoods by critics. “It’s still like being back in the ’60s with computers,” one exec told shareholders at the annual meeting Wednesday, the Associated Press reports. Now that’s a frightening thought... This article is from dailybriefing.blogs.fortune.cnn.com/2008/01/17/monsanto-stock-takes-a-plunge
Tuesday, January 15, 2008
MON Growth Looks to Continue
Tuesday January 15, 11:11 am ET ByAlan Farley, RealMoney.com Contributor
Agricultural stocks have been holding up well in this brutally weak January environment. This outperformance sets the group apart from last year's market leaders. They're one of the few sectors bought heavily in 2007 that are still attracting strong interest. This bullish divergence points to the likelihood of higher prices in the months ahead.
The group attracted firm bids on Friday and Monday, after the USDA's World Ag Supply and Demand Estimates January report confirmed strong demand for a wide variety of grains. Many sector components jumped off well-established basing patterns, while a few ran up to new rally highs.
Let's look at the major agricultural players and see where they might be headed as fourth-quarter earnings season descends on the market. With leadership faltering in so many other groups, will these stocks remain relatively safe havens for investors seeking strong 2008 returns?
Monsanto is the best-known agricultural chemical company, with a market cap of over $66 billion dollars. The stock has been moving higher in a powerful uptrend for the last five years. It carved out an all-time high on Monday, after filling a gap between 112 and 117.
Note how last week's 11-point intraday decline and reversal reduced short-term selling pressure and set the stage for Monday's strong rally. However, the recent volume pattern points to profit-taking under the surface and could be an early warning of a larger-scale correction as we move through the first quarter
Agricultural stocks have been holding up well in this brutally weak January environment. This outperformance sets the group apart from last year's market leaders. They're one of the few sectors bought heavily in 2007 that are still attracting strong interest. This bullish divergence points to the likelihood of higher prices in the months ahead.
The group attracted firm bids on Friday and Monday, after the USDA's World Ag Supply and Demand Estimates January report confirmed strong demand for a wide variety of grains. Many sector components jumped off well-established basing patterns, while a few ran up to new rally highs.
Let's look at the major agricultural players and see where they might be headed as fourth-quarter earnings season descends on the market. With leadership faltering in so many other groups, will these stocks remain relatively safe havens for investors seeking strong 2008 returns?
Monsanto is the best-known agricultural chemical company, with a market cap of over $66 billion dollars. The stock has been moving higher in a powerful uptrend for the last five years. It carved out an all-time high on Monday, after filling a gap between 112 and 117.
Note how last week's 11-point intraday decline and reversal reduced short-term selling pressure and set the stage for Monday's strong rally. However, the recent volume pattern points to profit-taking under the surface and could be an early warning of a larger-scale correction as we move through the first quarter
Farm equipment has been a stockpicker's market for some time, with leaders like Deere and notable laggards like Caterpillar . Deere peaked out after New Year's Day, dropped back to 50-day moving average support and surged to an all-time high on Monday.
Like Monsanto, we're seeing a good deal of distribution off the historic highs. However, this stock continues to hold up very well through market weakness. Last week's bull hammer reversal has laid out the swing low to watch in the next few weeks. Notably, the stock needs to stay above 83.61 to keep the bullish tone intact.
Mosaic is crop-nutrient and animal-feed company that trades like a tech stock. Its wide swings point to the influence of short-term traders in day-to-day price development. This isn't likely to change soon, with the sector offering one of the few upside plays right now for the typical chat room crowd.
The stock ran up to "round number" 100 on Jan. 3, pulled back for four days, and zoomed to a new high on Monday. This breakout could eventually lift price another 20 points, but the level rarely gives way without a protracted fight, so look for short-sellers to establish aggressive positions very soon
Terra Nitrogen is the smallest agricultural company in today's review, but it shows the most interesting short-term opportunity. The stock rallied up to 140 in July and pulled back. It returned to this level in December and broke out two weeks later, completing a cup-and-handle pattern.
The rally spike hit 159 a few days later, with price then pulling back sharply. That decline undercut the breakout level for three sessions. The stock jumped higher on Friday and ran up to a new high on Monday. This sets up an excellent trade entry when price pulls back to fill the 147 to 150 gap.
Finally let's look at CF Industries , my favorite short-term play in the sector. No I don't like it because it shows a graceful bull pattern. Rather, the daytrader in me enjoys the wicked intraday spikes. This stock can move like a bandit, with 7-10 point ranges on relatively calm trading days.
The stock mounted "round number" 100 and consolidated above that level for three weeks. It pressed higher with the broad sector on Monday, posting an all-time high. Look for this move to stall out and give way to a pullback that drops price toward 110. That level could initiate a followthrough rally that presses above 130 later this month.
The stock mounted "round number" 100 and consolidated above that level for three weeks. It pressed higher with the broad sector on Monday, posting an all-time high. Look for this move to stall out and give way to a pullback that drops price toward 110. That level could initiate a followthrough rally that presses above 130 later this month.
Monday, January 14, 2008
Stop Trading!: Safety In Seeds
An emergency Fed meeting to cut rates is exactly what this market needs, Cramer said on Friday’s Stop Trading!. That’s how you know it probably won’t happen.
Even though it has become more evident in recent days that the central bank is willing to ease, Cramer said he remains amazed by the “smugness and recklessness” of Fed officers who are unwilling to recognize that the financial market is in “dire straights.”
Read full Story and watch video http://www.cnbc.com/id/22609503
Even though it has become more evident in recent days that the central bank is willing to ease, Cramer said he remains amazed by the “smugness and recklessness” of Fed officers who are unwilling to recognize that the financial market is in “dire straights.”
Read full Story and watch video http://www.cnbc.com/id/22609503
What a breakout today
MOS , POT, MON all AG stocks are up today. MOO is up by 1.62
Link to what Cramer said today about AG
http://www.thestreet.com/video/index.html?clipId=10398519&channel=Cramer+On+Demand&cm_ven=YAHOO&cm_cat=&cm_ite=
Link to what Cramer said today about AG
http://www.thestreet.com/video/index.html?clipId=10398519&channel=Cramer+On+Demand&cm_ven=YAHOO&cm_cat=&cm_ite=
How to Outperform the Market and Manage Risk With ETFs
By Scott RothbortRealMoney Contributor1/11/2008 4:42 PM EST
Thanks to the explosion of exchange-traded funds (ETFs), there is a revolution taking place in the passively managed funds business.
Many people view ETFs as a lazy way to invest. Indeed, if all you want is an index-based portfolio, then ETFs offer that with built-in underperformance, thanks to the fees that they incur. However, ETFs, while somewhat static, can provide active management strategies to investors who seek to dynamically outperform their target benchmark or inject risk management into their portfolios. Here are two ways to accomplish those goals.
How to Use ETFs for Rapid Asset Reallocation
In past lessons, I have discussed the need to periodically review your portfolio and reduce the risk of excessive exposure or reallocate assets to other sectors.
A two-step process is undertaken when reallocating assets. Step one: Identify which sector or asset class needs to be reduced or eliminated and determine its replacement. Step two: Identify the individual securities you'll invest in. While the first step is a relatively quick process, the second step can longer. This creates an overall lag in the investment decision-making process.
For example, let's say that in step one, you decide to reduce your exposure to the financial sector and sell your financial holdings. Your reallocation plan is to increase exposure to the agricultural sector. However, that requires some time-consuming research before step two. Do you buy Bunge (BG - Cramer's Take - Stockpickr - Rating), Du Pont (DD - Cramer's Take - Stockpickr - Rating), Deere (DE - Cramer's Take - Stockpickr - Rating), Monsanto (MON - Cramer's Take - Stockpickr) or Potash (POT - Cramer's Take - Stockpickr - Rating)? There are five possibilities, and if you wait to do the detailed research to pick one, you can lose out on a sector allocation opportunity. So we break down step two in to two parts:
Step 2A. Use an ETF as a placeholder for the asset allocation. In this case we would select the Market Vectors Global Agribusiness ETF (MOO - Cramer's Take - Stockpickr).
Step 2B. Now we have the luxury of time to perform due diligence and select a stock that represents the best opportunity in the sector for long term appreciation, without losing exposure to that sector as we perform this research.
Traditionally, hedging requires the use of more sophisticated techniques, such as short-selling, futures or options. These activities take place in commodity or margin accounts. Because of securities and credit regulations, not all investors and investment accounts can transact in these ways. This includes IRAs, which do not have access to short selling or put buying. However, all is not lost; individual investors now have a range of ETFs to fill this void.
As the ETF industry continues to evolve, a vast array of investment products have been developed to suit the hedging needs of all types of investors in all types of accounts.
Let's look at the S&P 500 Index (SPX - Cramer's Take - Stockpickr) as an example. The basis ETF for the S&P 500 is the S&P 500 Depository Receipt (SPY - Cramer's Take - Stockpickr - Rating), also commonly referred to as the "Spyder" (or "SPDR"). This S&P 500 ETF is a trust that tracks the S&P 500 Index (with some minor subtraction for fees and expenses). Thus, if you want exposure to all 500 companies in the S&P, then buying the S&P 500 Depository
Receipt is an effective way to do it.
On the other hand, if you want to short the S&P or hedge S&P risk, you can do so by shorting the Spyder. However, as I mentioned before, if you are trading in a cash account, then this provides no help in terms of risk management. Thus, an inverse ETF was created, the ProShares Short S&P 500 (SH - Cramer's Take - Stockpickr - Rating), which provides a negative relationship to the S&P.
So if you want downside ("synthetic" short) exposure to the S&P, you can buy the Short S&P 500 ETF. How does the short ETF work? Simply put, as the S&P index declines, the Short S&P 500 ETF rises. As the S&P rises, the Short S&P ETF declines.
What is so powerful about these inverse ETFs is that they do not require a margin account. But the ETF world did not stop there. ETF companies have also created leveraged ETFs to get you double exposure to an index, such as the S&P. The leveraged ETFs are available in both the long variety, such as the ProShares Ultra S&P 500 (SSO - Cramer's Take - Stockpickr - Rating) and the short variety, such as the ProShares UltraShort S&P 500 ProShares (SDS - Cramer's Take - Stockpickr - Rating). These leveraged ETFs can only be traded in cash accounts and eliminate the need to trade on margin. However, be forewarned, with these leveraged ETFs, you can lose money twice as fast.
How I Manage Risk With ETFs
Here is one risk management method which I have employed in the past and plan to use again. Say you are 100% long in your account. You want to move to a more neutral position. Take the following actions:
1. Sell 30% of your portfolio. When I say 30% I do not mean 30% of the market value. I mean 30% of the beta value of the portfolio (see "The Finance Professor: Manage Risk Like a Pro"). You can achieve this by selling 30% of each position or carefully vetting out individual positions
to arrive at this goal.
You should now have a portfolio that is 70% invested and 30% in cash. 2. With the sale proceeds, buy the UltraShort S&P500 ETF. By using 30% of your risk capital to buy the "ultra-short" ETF, you have now created twice that amount (60%) in downside exposure.
You should now have a portfolio that is only 10% exposed to the market. Please note: the exposure may vary by portfolio due to individual beta calculations and tracking errors. A tracking error is the difference between the actual performance of a portfolio and the benchmark index which it is designed to imitate.
3. Monitor the market. Once the market has corrected, you can sell your ultrashort hedge and redeploy your capital back into the market.
ETFs have a variety of uses and come in many different forms. This lesson outlined two interesting ways you can use ETFs as part of your risk management and overall investment process. In the future, I will present other techniques for managing your portfolio with ETFs. In the meantime, if you are looking to reallocate a portion of your assets or go to a more neutral market stance, consider using the strategies I outlined above.
Thanks to the explosion of exchange-traded funds (ETFs), there is a revolution taking place in the passively managed funds business.
Many people view ETFs as a lazy way to invest. Indeed, if all you want is an index-based portfolio, then ETFs offer that with built-in underperformance, thanks to the fees that they incur. However, ETFs, while somewhat static, can provide active management strategies to investors who seek to dynamically outperform their target benchmark or inject risk management into their portfolios. Here are two ways to accomplish those goals.
How to Use ETFs for Rapid Asset Reallocation
In past lessons, I have discussed the need to periodically review your portfolio and reduce the risk of excessive exposure or reallocate assets to other sectors.
A two-step process is undertaken when reallocating assets. Step one: Identify which sector or asset class needs to be reduced or eliminated and determine its replacement. Step two: Identify the individual securities you'll invest in. While the first step is a relatively quick process, the second step can longer. This creates an overall lag in the investment decision-making process.
For example, let's say that in step one, you decide to reduce your exposure to the financial sector and sell your financial holdings. Your reallocation plan is to increase exposure to the agricultural sector. However, that requires some time-consuming research before step two. Do you buy Bunge (BG - Cramer's Take - Stockpickr - Rating), Du Pont (DD - Cramer's Take - Stockpickr - Rating), Deere (DE - Cramer's Take - Stockpickr - Rating), Monsanto (MON - Cramer's Take - Stockpickr) or Potash (POT - Cramer's Take - Stockpickr - Rating)? There are five possibilities, and if you wait to do the detailed research to pick one, you can lose out on a sector allocation opportunity. So we break down step two in to two parts:
Step 2A. Use an ETF as a placeholder for the asset allocation. In this case we would select the Market Vectors Global Agribusiness ETF (MOO - Cramer's Take - Stockpickr).
Step 2B. Now we have the luxury of time to perform due diligence and select a stock that represents the best opportunity in the sector for long term appreciation, without losing exposure to that sector as we perform this research.
Traditionally, hedging requires the use of more sophisticated techniques, such as short-selling, futures or options. These activities take place in commodity or margin accounts. Because of securities and credit regulations, not all investors and investment accounts can transact in these ways. This includes IRAs, which do not have access to short selling or put buying. However, all is not lost; individual investors now have a range of ETFs to fill this void.
As the ETF industry continues to evolve, a vast array of investment products have been developed to suit the hedging needs of all types of investors in all types of accounts.
Let's look at the S&P 500 Index (SPX - Cramer's Take - Stockpickr) as an example. The basis ETF for the S&P 500 is the S&P 500 Depository Receipt (SPY - Cramer's Take - Stockpickr - Rating), also commonly referred to as the "Spyder" (or "SPDR"). This S&P 500 ETF is a trust that tracks the S&P 500 Index (with some minor subtraction for fees and expenses). Thus, if you want exposure to all 500 companies in the S&P, then buying the S&P 500 Depository
Receipt is an effective way to do it.
On the other hand, if you want to short the S&P or hedge S&P risk, you can do so by shorting the Spyder. However, as I mentioned before, if you are trading in a cash account, then this provides no help in terms of risk management. Thus, an inverse ETF was created, the ProShares Short S&P 500 (SH - Cramer's Take - Stockpickr - Rating), which provides a negative relationship to the S&P.
So if you want downside ("synthetic" short) exposure to the S&P, you can buy the Short S&P 500 ETF. How does the short ETF work? Simply put, as the S&P index declines, the Short S&P 500 ETF rises. As the S&P rises, the Short S&P ETF declines.
What is so powerful about these inverse ETFs is that they do not require a margin account. But the ETF world did not stop there. ETF companies have also created leveraged ETFs to get you double exposure to an index, such as the S&P. The leveraged ETFs are available in both the long variety, such as the ProShares Ultra S&P 500 (SSO - Cramer's Take - Stockpickr - Rating) and the short variety, such as the ProShares UltraShort S&P 500 ProShares (SDS - Cramer's Take - Stockpickr - Rating). These leveraged ETFs can only be traded in cash accounts and eliminate the need to trade on margin. However, be forewarned, with these leveraged ETFs, you can lose money twice as fast.
How I Manage Risk With ETFs
Here is one risk management method which I have employed in the past and plan to use again. Say you are 100% long in your account. You want to move to a more neutral position. Take the following actions:
1. Sell 30% of your portfolio. When I say 30% I do not mean 30% of the market value. I mean 30% of the beta value of the portfolio (see "The Finance Professor: Manage Risk Like a Pro"). You can achieve this by selling 30% of each position or carefully vetting out individual positions
to arrive at this goal.
You should now have a portfolio that is 70% invested and 30% in cash. 2. With the sale proceeds, buy the UltraShort S&P500 ETF. By using 30% of your risk capital to buy the "ultra-short" ETF, you have now created twice that amount (60%) in downside exposure.
You should now have a portfolio that is only 10% exposed to the market. Please note: the exposure may vary by portfolio due to individual beta calculations and tracking errors. A tracking error is the difference between the actual performance of a portfolio and the benchmark index which it is designed to imitate.
3. Monitor the market. Once the market has corrected, you can sell your ultrashort hedge and redeploy your capital back into the market.
ETFs have a variety of uses and come in many different forms. This lesson outlined two interesting ways you can use ETFs as part of your risk management and overall investment process. In the future, I will present other techniques for managing your portfolio with ETFs. In the meantime, if you are looking to reallocate a portion of your assets or go to a more neutral market stance, consider using the strategies I outlined above.
Friday, January 11, 2008
Morning Star thinks CF is overvalued
CF Industries Holdings, Inc. (NYSE:CF - News)Industry: ChemicalsPrice to Fair Value Estimate: 229%From the Analyst Report: "While the near-term outlook is certainly bright for CF, we have serious concerns regarding the sustainability of current market conditions. First, the tremendous profits being reaped by domestic producers are sure to attract additional supply to this market, which has fairly low barriers to entry. Also, natural-gas costs are a looming concern, because they can represent between 60% to 80% of the firm's total costs. Any shift in what has been a relatively benign cost environment since Katrina could quickly send profits tumbling. Finally, any decline in international shipping rates could quickly increase the attractiveness of imported product and force domestic producers to reduce their operating rates."
Defensive Stocks: Agriculture is Popular
from CNBC.com
Investors should raise their exposure to agricultural commodities and buy into stocks in the sector, as demand from emerging markets increases and the size of arable land is shrinking, putting additional pressure on the already tight supply, analysts said Friday.
New consumption patterns appear, as China and other emerging nations seek to move their diets into a more protein-based Westernized diet, and demand is rising because grains are now also used as a source of fuel, William Rhind, head of UK sales at ETF Securities told "Squawk Box Europe."
"Right now for grains the fundamentals are very positive," Rhind said.
Investors should raise their exposure to agricultural commodities and buy into stocks in the sector, as demand from emerging markets increases and the size of arable land is shrinking, putting additional pressure on the already tight supply, analysts said Friday.
New consumption patterns appear, as China and other emerging nations seek to move their diets into a more protein-based Westernized diet, and demand is rising because grains are now also used as a source of fuel, William Rhind, head of UK sales at ETF Securities told "Squawk Box Europe."
"Right now for grains the fundamentals are very positive," Rhind said.
The European Union has until Friday afternoon to comply with a World Trade Organization ruling to end its 6-year ban on imports of genetically modified organisms. But Brussels may stall for more time, as the debate over GMO continues to cause controversy in some key member states.
GMO is a largely political issue, as although it essentially increases the yield out of a crop, consumer groups and environmentalists in Europe argue that its long-term effects on the health and environment have not been tested.
Health Fears
Brussels have had difficulty in implementing the ruling since some of its 27 member states are operating their own bans, which EU law allows them to do under certain conditions.
Between 1997 and 2000, five EU countries banned specific GMOs on their territory, focusing on three maize and two rapeseed types that were approved shortly before the EU's six-year moratorium on new biotech authorizations, according to Reuters.
Brussels have had difficulty in implementing the ruling since some of its 27 member states are operating their own bans, which EU law allows them to do under certain conditions.
Between 1997 and 2000, five EU countries banned specific GMOs on their territory, focusing on three maize and two rapeseed types that were approved shortly before the EU's six-year moratorium on new biotech authorizations, according to Reuters.
The world's top three growers of GMO crops, Argentina, Canada and the US, stand to gain substantially if the ban is lifted. Likewise biotech companies such as Monsanto could see their sales flourish.
Monsanto, in particular, stands to gain the most as it has a number of key maize products that are banned under the ruling.
Analysts do not foresee an immediate reaction for the grain market from the ruling, but say that over the long term, if there is more supply on the market, prices of products may come down.
For the moment, though, investors can take advantage of the boom in commodities by investing in connected areas, Stephen Pope, chief market strategist at Cantor Fitzgerald, said.
Investors could look at chemical companies like Syngenta that specialize in herbicides and phosphates that actually enhance the crop as it grows instead of focusing on actual genetically modified crops, Pope said.
For the moment, though, investors can take advantage of the boom in commodities by investing in connected areas, Stephen Pope, chief market strategist at Cantor Fitzgerald, said.
Investors could look at chemical companies like Syngenta that specialize in herbicides and phosphates that actually enhance the crop as it grows instead of focusing on actual genetically modified crops, Pope said.
I think there's plenty of scope for the demand for crop enhancement to carry on, and I think this story has plenty to run as an alternative to different sectors this year," Pope said.
Thursday, January 10, 2008
Farming ETF In The Hot House
This is the Forbes Stock of the week: MOO
Have you seen what's happening down on the farm? In case you've missed the fun, these are boom times for farmers, and for companies that sell them the inputs they need to grow crops like corn, wheat and soybeans.
In the past two years, the prices of corn and soybeans have more than doubled. Wheat has more than tripled. Credit the global commodity boom, government subsidies for ethanol or just what many farmers would consider an overdue turn in the cycle.
Thanks to the good fortune of farmers, a host of other companies in a variety of industries are also benefiting from the boom. Companies that sell fertilizer, like Mosaic (nyse: MOS - news - people ) and Potash (nyse: POT - news - people ), or equipment, like Deere (nyse: DE - news - people ) and CNH Global (nyse: CNH - news - people ).
For a little more than four months now, there's also been an exchange-traded fund that invests in companies tied to agriculture. The Market Vectors Global Agribusiness ETF (amex:MOO) attempts to replicate the performance of the DAXglobal Agribusiness Index, 40 companies worldwide engaged in the agriculture industry. Since inception on Aug. 31, 2007, the MOO has gained about 40% in price, closing Wednesday at $57.15.
John Schloegel and Ron Rowland of All Star Fund Traderin Austin, Texas, recommend buying the MOO. "This is a pure play on the red hot agriculture space and these names are in demand by investors," says Schloegel.
Schloegel says that the MOO will be a welcome respite from any continued selling in technology and financials. In addition, he points out that if your portfolio is underweight in commodities, this ETF is a "back door for commodity type ideas."
All Star Fund Trader uses momentum to pick its ETFs and narrowly focused sector and country mutual funds. Over the past one- and three-month periods, and for the past week, MOO has been the top-performing fund in Morningstar’s world stock category.
The fund has an expense ratio of 0.50%.
Have you seen what's happening down on the farm? In case you've missed the fun, these are boom times for farmers, and for companies that sell them the inputs they need to grow crops like corn, wheat and soybeans.
In the past two years, the prices of corn and soybeans have more than doubled. Wheat has more than tripled. Credit the global commodity boom, government subsidies for ethanol or just what many farmers would consider an overdue turn in the cycle.
Thanks to the good fortune of farmers, a host of other companies in a variety of industries are also benefiting from the boom. Companies that sell fertilizer, like Mosaic (nyse: MOS - news - people ) and Potash (nyse: POT - news - people ), or equipment, like Deere (nyse: DE - news - people ) and CNH Global (nyse: CNH - news - people ).
For a little more than four months now, there's also been an exchange-traded fund that invests in companies tied to agriculture. The Market Vectors Global Agribusiness ETF (amex:MOO) attempts to replicate the performance of the DAXglobal Agribusiness Index, 40 companies worldwide engaged in the agriculture industry. Since inception on Aug. 31, 2007, the MOO has gained about 40% in price, closing Wednesday at $57.15.
John Schloegel and Ron Rowland of All Star Fund Traderin Austin, Texas, recommend buying the MOO. "This is a pure play on the red hot agriculture space and these names are in demand by investors," says Schloegel.
Schloegel says that the MOO will be a welcome respite from any continued selling in technology and financials. In addition, he points out that if your portfolio is underweight in commodities, this ETF is a "back door for commodity type ideas."
All Star Fund Trader uses momentum to pick its ETFs and narrowly focused sector and country mutual funds. Over the past one- and three-month periods, and for the past week, MOO has been the top-performing fund in Morningstar’s world stock category.
The fund has an expense ratio of 0.50%.
Wednesday, January 9, 2008
Profits increase six fold for Mosiac
What a result !!
Quarterly Net Earnings Increased Nearly Six-Fold to $394.0 million; Diluted EPS Grew 493% to $0.89
HIGHLIGHTS Mosaic reported record results, including net earnings of $394.0 million, or $0.89 per diluted share ("per share"), for the second quarter ended November 30, 2007, an increase of $328.1 million compared to the same period a year ago. These second quarter results included the following:
- Cash flow from operations of $542.5 million and the prepayment of $450 million of long-term debt.
- An average diammonium phosphate (DAP) price of $417 per tonne, a $174 per tonne increase compared with a year ago and a $10 per tonne increase compared with the first quarter of fiscal 2008.
- An average potash selling price of $171 per tonne, up $29 per tonne from a year ago and an $11 per tonne increase from the first quarter of fiscal 2008.
- A foreign currency transaction loss of $52.4 million, or $0.09 per share, compared to a gain of $19.8 million, or $0.03 per share, a year ago.
- A tax benefit of $35.9 million, or $0.08 per share, relating to certain tax matters specific to the second quarter
Quarterly Net Earnings Increased Nearly Six-Fold to $394.0 million; Diluted EPS Grew 493% to $0.89
HIGHLIGHTS Mosaic reported record results, including net earnings of $394.0 million, or $0.89 per diluted share ("per share"), for the second quarter ended November 30, 2007, an increase of $328.1 million compared to the same period a year ago. These second quarter results included the following:
- Cash flow from operations of $542.5 million and the prepayment of $450 million of long-term debt.
- An average diammonium phosphate (DAP) price of $417 per tonne, a $174 per tonne increase compared with a year ago and a $10 per tonne increase compared with the first quarter of fiscal 2008.
- An average potash selling price of $171 per tonne, up $29 per tonne from a year ago and an $11 per tonne increase from the first quarter of fiscal 2008.
- A foreign currency transaction loss of $52.4 million, or $0.09 per share, compared to a gain of $19.8 million, or $0.03 per share, a year ago.
- A tax benefit of $35.9 million, or $0.08 per share, relating to certain tax matters specific to the second quarter
What a roller coaster today for AG stocks
At one point MOO was trading at less than $55. Good it closed at above $57. I am still watching the May 08 $50 call.
DAXglobal(R) Agribusiness Index returned 90.02 Percent in 2007
DAXglobal(R) Agribusiness Index returned 90.02 Percent in 2007
Today's DuPont story
DuPont (DD)
Share price as of Tuesday's close: $42.75
Share price now: $44.78
Percent change: 4.8%
Volume: 17.3 million shares, daily average 5.8 million
The NewsStrong growth overseas bore fruit for DuPont (DD) Wednesday after the conglomerate raised earnings forecasts for the fourth quarter and the next year. Shares closed up 5%.
The Wilmington, Del.-based maker of chemicals, building materials and agricultural products said Wednesday 2007 earnings will be at the upper end of its previously announced range of $3.15 to $3.20 a share, thanks to strong overseas seed sales. The company is scheduled to report fourth-quarter and full-year earnings on Jan. 22.
Wall Street analysts polled by Thomson Financial expected, on average, quarterly earnings of 49 cents a share and full-year earnings of $3.19 a share.
DuPont also increased its 2008 earnings outlook to a range of $3.35 to $3.55 a share, up from the Oct. 23 projection of $3.31 to $3.52 a share. Wall Street currently estimates 2008 earnings of $3.42 a share, on average.
DuPont Chairman and CEO Charles Holliday said the company expects 11% earnings growth from 2006, despite a rough year for many of DuPont's domestic businesses. Those in the construction and building materials sectors, in particular, were hit by the U.S. housing slump and higher raw materials prices.
"We expect that continued growth world-wide from our agriculture and nutrition business segment and growth from all of our segments in emerging markets will more than compensate for a slower U.S. economy," Holliday said.
The AnalysisAfter a disappointing year, DuPont's good news will give its shares a lift and clear up some uncertainties for investors.
The agriculture and nutrition business, including the Pioneer series of seeds, accounts for 23% of revenue, and its success, particularly in Brazil, is a global good-news story brightening the dreary domestic scene.
"With the announcement that they were raising 2007 estimates to the higher end of their range and a 2008 estimate that was slightly better than expected, it really gives investors the idea that this is a global company with a footprint in every major economy of the world," says Bill Selesky, an analyst with Argus Research.
Investors could use the reassurance after a trying 2007. As housing starts fell, DuPont's shares plunged, shedding 21% from their early July peak near $54.
The housing downturn has been bad news for DuPont's Tyvek building wrap, Corian countertops and titanium dioxide, a paint additive of which of DuPont is a major producer. But global demand for corn and other foodstuffs should see the company through, says Morningstar analyst Ben Johnson.
"The story of the day is that strength in agriculture is going to bridge the gap over some pretty rough waters in the North American economy," he says. "This is really helping DuPont keep their heads above water."
The Bottom LineDuPont is a great example of a blue chip capitalizing on what economist Ed Yardeni has called "the greatest global boom of all time."
Although it's far from certain that China, India and Brazil can keep up last year's torrid pace, richer economies are quickly developing robust appetites and the agriculture sector is a primary beneficiary, Johnson says. DuPont has approximately 30% of the U.S. seed business.
"DuPont slipped a bit a few quarters back, because investors were focused on the softness of the housing market, and I think there were concerns the agriculture business wasn't living up to high expectations," Johnson says. "People were wondering if DuPont was going to catch this strong tailwind like the Monsantos (MON) and Potash Corporations (POT) of the world. Hollidays' statement made it clear they were."
This article was from smartmoney.com
Share price as of Tuesday's close: $42.75
Share price now: $44.78
Percent change: 4.8%
Volume: 17.3 million shares, daily average 5.8 million
The NewsStrong growth overseas bore fruit for DuPont (DD) Wednesday after the conglomerate raised earnings forecasts for the fourth quarter and the next year. Shares closed up 5%.
The Wilmington, Del.-based maker of chemicals, building materials and agricultural products said Wednesday 2007 earnings will be at the upper end of its previously announced range of $3.15 to $3.20 a share, thanks to strong overseas seed sales. The company is scheduled to report fourth-quarter and full-year earnings on Jan. 22.
Wall Street analysts polled by Thomson Financial expected, on average, quarterly earnings of 49 cents a share and full-year earnings of $3.19 a share.
DuPont also increased its 2008 earnings outlook to a range of $3.35 to $3.55 a share, up from the Oct. 23 projection of $3.31 to $3.52 a share. Wall Street currently estimates 2008 earnings of $3.42 a share, on average.
DuPont Chairman and CEO Charles Holliday said the company expects 11% earnings growth from 2006, despite a rough year for many of DuPont's domestic businesses. Those in the construction and building materials sectors, in particular, were hit by the U.S. housing slump and higher raw materials prices.
"We expect that continued growth world-wide from our agriculture and nutrition business segment and growth from all of our segments in emerging markets will more than compensate for a slower U.S. economy," Holliday said.
The AnalysisAfter a disappointing year, DuPont's good news will give its shares a lift and clear up some uncertainties for investors.
The agriculture and nutrition business, including the Pioneer series of seeds, accounts for 23% of revenue, and its success, particularly in Brazil, is a global good-news story brightening the dreary domestic scene.
"With the announcement that they were raising 2007 estimates to the higher end of their range and a 2008 estimate that was slightly better than expected, it really gives investors the idea that this is a global company with a footprint in every major economy of the world," says Bill Selesky, an analyst with Argus Research.
Investors could use the reassurance after a trying 2007. As housing starts fell, DuPont's shares plunged, shedding 21% from their early July peak near $54.
The housing downturn has been bad news for DuPont's Tyvek building wrap, Corian countertops and titanium dioxide, a paint additive of which of DuPont is a major producer. But global demand for corn and other foodstuffs should see the company through, says Morningstar analyst Ben Johnson.
"The story of the day is that strength in agriculture is going to bridge the gap over some pretty rough waters in the North American economy," he says. "This is really helping DuPont keep their heads above water."
The Bottom LineDuPont is a great example of a blue chip capitalizing on what economist Ed Yardeni has called "the greatest global boom of all time."
Although it's far from certain that China, India and Brazil can keep up last year's torrid pace, richer economies are quickly developing robust appetites and the agriculture sector is a primary beneficiary, Johnson says. DuPont has approximately 30% of the U.S. seed business.
"DuPont slipped a bit a few quarters back, because investors were focused on the softness of the housing market, and I think there were concerns the agriculture business wasn't living up to high expectations," Johnson says. "People were wondering if DuPont was going to catch this strong tailwind like the Monsantos (MON) and Potash Corporations (POT) of the world. Hollidays' statement made it clear they were."
This article was from smartmoney.com
Tuesday, January 8, 2008
SEED does not look like a winner
No movement today. Seemed very hot last week. But it looks like the pumpers are out of it now. We will wait and watch. I am watching the Aug 08, $10.00 call.
The Outlook Darkens for Metal Benders
INVESTORS LAST YEAR sought to hide in stocks with little exposure to the U.S. housing market and the American consumer. The shares of industrial companies and materials producers fit the bill. The fortunes of these companies were bolstered by global growth in capital spending, while the industries' international sales -- some 40% to 45% of total revenue -- benefited from a weak dollar.
This year may be less kind to both sectors, however, particularly if the U.S. economy slips into recession -- a risk not fully reflected in most industrial and materials shares.
The industrial components of the Standard & Poor's 500 index have returned almost 15% a year for the past five years, while the S&P materials sector has gained an average of 19% annually. Big winners in 2007 included Deere (ticker: DE), up 96% to close at 93.12 on Dec. 31; Honeywell (HON), up 36% to 61.57; Freeport McMoRan Copper & Gold (FCX), up 84% to 102.44, and Alcoa (AA), up 22% to 36.55.
Almost all stocks decline in a recession, except those involved with "special situations" such as restructurings, says David Rosenberg, chief North American economist at Merrill Lynch. Industrials might outperform as they benefit from a weaker dollar, but they will still decline in a recession. "To think that there won't be a spillover into other sectors doesn't line up with historic scrutiny," says Rosenberg, whose indicators put the odds of a recession this year at 60% to 100%.
By his calculations, industrials fall 28% from peak to trough around the time of a recession. At the moment, the S&P industrials are down only 7% from their October high -- thus pricing in a 25% chance of recession. Material stocks typically decline 27% in recession periods; they have fallen only 4% from their peak, also set in October.
Fans of both sectors believe that strong international sales will protect these companies, many of which have been big beneficiaries of China's growth, even if the U.S. economy starts to shrink. But the bulls may be underestimating the knock-on effects of a U.S.-consumer-led slowdown on economies overseas, and forgetting the U.S. consumer accounts for 19% of global gross domestic product.
After years of heady growth, heavy-industry stocks could hit the wall as global growth slows.
Wall Street analysts still see strong earnings gains for both sectors in 2008. The 56 industrial companies in the S&P 500 are likely to lift profits by 12% this year, about on par with '07's estimated 13% growth, according to Thomson Financial. The 28 S&P 500 materials companies could boost earnings 11%, up from an estimated 5% in '07.
Industrial companies currently trade for an average of 15.3 times 2008 estimated earnings, while materials fetch 15.9 times expected profits. Neither valuation is particularly rich, nor do they hint at tougher times ahead. The price/earnings multiples of cyclical companies typically contract as earnings peak and investors begin to discount diminished growth in the future.
Tobias Levkovich, chief U.S. equity strategist at Citigroup, recommends underweighting capital goods and materials stocks. Four indicators he tracks -- trailing price-to-earnings, price-to-book value, enterprise value-to-cash flow and the P/E-to-growth ratio -- suggest industrials are overvalued. He is wary of the materials sector because of its cyclicality; new capacity is coming online in the chemicals industry, and earnings revisions are trending downward throughout the sector.
The former machinery analyst says the flood of capital sluicing into emerging markets in recent years eventually will result in overbuilding, if it hasn't done so already. This will hurt suppliers of raw and finished goods, such as aluminum, iron ore and steel, and manufacturers of transportation, construction and mining equipment. "Excessive money leads to excessive investment," Levkovich says, citing the buildup in petrodollars and foreign-government surpluses. "The amount of money pouring into emerging markets is getting to levels that will come back to bite us."
The Bottom Line:
S&P materials stocks have risen 19% annually, and industrials 15%, for the past five years. Both sectors could see steep declines if the U.S. economy enters a recession.
Ed Shill, chief investment officer of QCI Asset Management in Rochester, N.Y., is underweight industrials and owns no materials stocks. "Virtually any commodity price is trading well above its cost of production," he says.
Shill points to copper, which trades just north of $3 a pound but costs only 75 cents to produce. International growth doesn't have to stop, but merely slow beyond expectations, to hurt these sectors. "My guess is, you'll have a chance to buy these names cheaper," says Shill.
If the U.S. economy is on the threshold of recession, that chance could come soon.
This year may be less kind to both sectors, however, particularly if the U.S. economy slips into recession -- a risk not fully reflected in most industrial and materials shares.
The industrial components of the Standard & Poor's 500 index have returned almost 15% a year for the past five years, while the S&P materials sector has gained an average of 19% annually. Big winners in 2007 included Deere (ticker: DE), up 96% to close at 93.12 on Dec. 31; Honeywell (HON), up 36% to 61.57; Freeport McMoRan Copper & Gold (FCX), up 84% to 102.44, and Alcoa (AA), up 22% to 36.55.
Almost all stocks decline in a recession, except those involved with "special situations" such as restructurings, says David Rosenberg, chief North American economist at Merrill Lynch. Industrials might outperform as they benefit from a weaker dollar, but they will still decline in a recession. "To think that there won't be a spillover into other sectors doesn't line up with historic scrutiny," says Rosenberg, whose indicators put the odds of a recession this year at 60% to 100%.
By his calculations, industrials fall 28% from peak to trough around the time of a recession. At the moment, the S&P industrials are down only 7% from their October high -- thus pricing in a 25% chance of recession. Material stocks typically decline 27% in recession periods; they have fallen only 4% from their peak, also set in October.
Fans of both sectors believe that strong international sales will protect these companies, many of which have been big beneficiaries of China's growth, even if the U.S. economy starts to shrink. But the bulls may be underestimating the knock-on effects of a U.S.-consumer-led slowdown on economies overseas, and forgetting the U.S. consumer accounts for 19% of global gross domestic product.
After years of heady growth, heavy-industry stocks could hit the wall as global growth slows.
Wall Street analysts still see strong earnings gains for both sectors in 2008. The 56 industrial companies in the S&P 500 are likely to lift profits by 12% this year, about on par with '07's estimated 13% growth, according to Thomson Financial. The 28 S&P 500 materials companies could boost earnings 11%, up from an estimated 5% in '07.
Industrial companies currently trade for an average of 15.3 times 2008 estimated earnings, while materials fetch 15.9 times expected profits. Neither valuation is particularly rich, nor do they hint at tougher times ahead. The price/earnings multiples of cyclical companies typically contract as earnings peak and investors begin to discount diminished growth in the future.
Tobias Levkovich, chief U.S. equity strategist at Citigroup, recommends underweighting capital goods and materials stocks. Four indicators he tracks -- trailing price-to-earnings, price-to-book value, enterprise value-to-cash flow and the P/E-to-growth ratio -- suggest industrials are overvalued. He is wary of the materials sector because of its cyclicality; new capacity is coming online in the chemicals industry, and earnings revisions are trending downward throughout the sector.
The former machinery analyst says the flood of capital sluicing into emerging markets in recent years eventually will result in overbuilding, if it hasn't done so already. This will hurt suppliers of raw and finished goods, such as aluminum, iron ore and steel, and manufacturers of transportation, construction and mining equipment. "Excessive money leads to excessive investment," Levkovich says, citing the buildup in petrodollars and foreign-government surpluses. "The amount of money pouring into emerging markets is getting to levels that will come back to bite us."
The Bottom Line:
S&P materials stocks have risen 19% annually, and industrials 15%, for the past five years. Both sectors could see steep declines if the U.S. economy enters a recession.
Ed Shill, chief investment officer of QCI Asset Management in Rochester, N.Y., is underweight industrials and owns no materials stocks. "Virtually any commodity price is trading well above its cost of production," he says.
Shill points to copper, which trades just north of $3 a pound but costs only 75 cents to produce. International growth doesn't have to stop, but merely slow beyond expectations, to hurt these sectors. "My guess is, you'll have a chance to buy these names cheaper," says Shill.
If the U.S. economy is on the threshold of recession, that chance could come soon.
Monday, January 7, 2008
MOO held steady today
Although the top AG stocks like MOS and POT were down today, MOO held its ground and was down only 10 cents. I think that is becasue its other holdings like BG and MON performed well. BG was up by almost 5 dollars. Also some of the forgien AG plays contributed.
Sunday, January 6, 2008
Is SEED reel or real ?
I would like to start this discussion. Is this stock reel (hyped, fiction like film reel ) or is it for real ?
Investors who feel SEED is for real, can look at the AUG 08, Strike $10.00 call.
Please post comments on whether you think SEED is reel or real.
Investors who feel SEED is for real, can look at the AUG 08, Strike $10.00 call.
Please post comments on whether you think SEED is reel or real.
MON's a Star, in Two Bull Markets
Why does Monsanto (MON - Cramer's Take - Stockpickr) elude people? Why do people not understand that we have a policy in this country and that policy makes Monsanto the Schlumberger (SLB - Cramer's Take - Stockpickr - Rating) of its group? Why can't people grasp that there is a worldwide food shortage and Monsanto is the answer for that, too?
Why are people continually shocked about how good this stock is? It is in the sweet spot of not one but two bull markets: the oil and gas shortage and the food shortage.
Every time one of these stocks reports, you get an amazing reaction: Agrium (AGU - Cramer's Take - Stockpickr - Rating), Mosiac (MOS - Cramer's Take - Stockpickr - Rating), Deere (DE - Cramer's Take - Stockpickr - Rating), Syngenta (SYT - Cramer's Take - Stockpickr) and Bunge (BG - Cramer's Take - Stockpickr - Rating) go up. Every time. It is amazing to me that there is this kind of "you have to be kidding, this can't be that good" impact.
I think some of this is a legacy from people thinking that Monsanto is a chemical stock, like a Dow (DOW - Cramer's Take - Stockpickr - Rating) or a DuPont (DD - Cramer's Take - Stockpickr - Rating). This is more of a biotech stock than a chemical stock.
The reaction to this company's earnings report today shows me that there is just still a lack of recognition of the ag bull market and a sense that the commodity prices for food have peaked.
Just the opposite. That's what this rally in ag, the endless rally, is about.
Random musings: One of the reasons I dislike this market so much is that a CVS (CVS - Cramer's Take - Stockpickr - Rating) can have a weak month at its drug stores, raise the lower end of its guidance anyway -- because of Caremark, which is Medco (MHS - Cramer's Take - Stockpickr - Rating) and Express Scripts (ESRX - Cramer's Take - Stockpickr - Rating) and not just drug stores -- and then just be annihilated. This stock is down a gigantic amount. I own it for Action Alerts PLUS and I am itching to buy it, as I told readers earlier this morning, when it goes below my $36 cost basis, which, at this velocity I believe will definitely happen.
from thestreet.com. Jan 3rd
Why are people continually shocked about how good this stock is? It is in the sweet spot of not one but two bull markets: the oil and gas shortage and the food shortage.
Every time one of these stocks reports, you get an amazing reaction: Agrium (AGU - Cramer's Take - Stockpickr - Rating), Mosiac (MOS - Cramer's Take - Stockpickr - Rating), Deere (DE - Cramer's Take - Stockpickr - Rating), Syngenta (SYT - Cramer's Take - Stockpickr) and Bunge (BG - Cramer's Take - Stockpickr - Rating) go up. Every time. It is amazing to me that there is this kind of "you have to be kidding, this can't be that good" impact.
I think some of this is a legacy from people thinking that Monsanto is a chemical stock, like a Dow (DOW - Cramer's Take - Stockpickr - Rating) or a DuPont (DD - Cramer's Take - Stockpickr - Rating). This is more of a biotech stock than a chemical stock.
The reaction to this company's earnings report today shows me that there is just still a lack of recognition of the ag bull market and a sense that the commodity prices for food have peaked.
Just the opposite. That's what this rally in ag, the endless rally, is about.
Random musings: One of the reasons I dislike this market so much is that a CVS (CVS - Cramer's Take - Stockpickr - Rating) can have a weak month at its drug stores, raise the lower end of its guidance anyway -- because of Caremark, which is Medco (MHS - Cramer's Take - Stockpickr - Rating) and Express Scripts (ESRX - Cramer's Take - Stockpickr - Rating) and not just drug stores -- and then just be annihilated. This stock is down a gigantic amount. I own it for Action Alerts PLUS and I am itching to buy it, as I told readers earlier this morning, when it goes below my $36 cost basis, which, at this velocity I believe will definitely happen.
from thestreet.com. Jan 3rd
Cramer recommends MON
Monsanto (MON - Cramer's Take - Stockpickr): "Monsanto's definitely leading. ... I do not want any one sector to be more than 20% of any person's portfolio, even if it is my favorite sector, which is ag." -- Jan 4th Mad Money Lightning round on CNBC
Mosaic earnings on Jan 9th
Mosaic Announces Second Quarter Fiscal 2008 Earnings Release and Conference CallWednesday January 2, 5:44 pm ET
PLYMOUTH, Minn., Jan. 2 /PRNewswire-FirstCall/ -- The Mosaic Company (NYSE: MOS - News) plans to issue its fiscal 2008 second quarter earnings results and financial tables on Wednesday, January 9, 2008, prior to the opening of the New York Stock Exchange. Results will also be available on Mosaic's website at www.mosaicco.com/investors.
The Company plans to conduct a conference call with presentation slides on Wednesday, January 9, 2008, to discuss the results. The call will begin at 10:00 a.m. Eastern Standard Time (9:00 a.m. Central Standard Time) and will last no longer than 60 minutes.
The conference call-in number is 888-680-0892 and passcode is 44890826. A replay of the audio call will be available through Wednesday, January 16, 2008. Please call 888-286-8010 to access the replay and use passcode 42452480.
A webcast of the conference call including the presentation slides, both live and as a replay, can be accessed by visiting Mosaic's website. The webcast will be available up to one year from the time of the earnings call. Please note that no individual phone calls will be taken to discuss the earnings announcement before the conference call.
About The Mosaic Company
The Mosaic Company is one of the world's leading producers and marketers of concentrated phosphates and potash crop nutrients. For the global agriculture industry, Mosaic is a single source of phosphates, potash, nitrogen fertilizers and feed ingredients. More information on the company is available at http://www.mosaicco.com/.
MEDIA CONTACT: Linda Thrasher, 763-577-2864
INVESTOR CONTACT: Christine Battist, 763-577-2828
PLYMOUTH, Minn., Jan. 2 /PRNewswire-FirstCall/ -- The Mosaic Company (NYSE: MOS - News) plans to issue its fiscal 2008 second quarter earnings results and financial tables on Wednesday, January 9, 2008, prior to the opening of the New York Stock Exchange. Results will also be available on Mosaic's website at www.mosaicco.com/investors.
The Company plans to conduct a conference call with presentation slides on Wednesday, January 9, 2008, to discuss the results. The call will begin at 10:00 a.m. Eastern Standard Time (9:00 a.m. Central Standard Time) and will last no longer than 60 minutes.
The conference call-in number is 888-680-0892 and passcode is 44890826. A replay of the audio call will be available through Wednesday, January 16, 2008. Please call 888-286-8010 to access the replay and use passcode 42452480.
A webcast of the conference call including the presentation slides, both live and as a replay, can be accessed by visiting Mosaic's website. The webcast will be available up to one year from the time of the earnings call. Please note that no individual phone calls will be taken to discuss the earnings announcement before the conference call.
About The Mosaic Company
The Mosaic Company is one of the world's leading producers and marketers of concentrated phosphates and potash crop nutrients. For the global agriculture industry, Mosaic is a single source of phosphates, potash, nitrogen fertilizers and feed ingredients. More information on the company is available at http://www.mosaicco.com/.
MEDIA CONTACT: Linda Thrasher, 763-577-2864
INVESTOR CONTACT: Christine Battist, 763-577-2828
One Way To Play Oil
With oil hitting $100 a barrel, should you be jumping onto this bandwagon -- or jumping off?
Try talking to fund manager Ken Heebner instead.
He's been beating the street for around 40 years. So when he says he's found an oil play that "may be the biggest investment I've ever seen in my life," it makes me sit up and take notice.
Mr. Heebner trounced the rest of Wall Street last year. His CGM Focus Fund soared 80%. (I own CGMFX in my portfolio).
He is an oil bull, and remains so even with oil piercing such exalted levels. "I think the overall picture is one where oil is going to remain elevated, with an upward bias," he says.
His fund is betting that way. When we sat down recently for an end-of-year conversation, he conceded that if oil prices fell "I'd need a new portfolio."
But while Mr. Heebner is betting on oil, it's notable that he's been looking beyond the big headline stocks like ExxonMobil and Chevron.
Instead he's found ways to play the oil boom that have kept him ahead of the pack.
Like Vimpel Communications, a Russian cellular company, which is benefiting as that country's oil and gas bonanza feeds through into consumers' wallets.
And fertilizer companies Mosaic and Potash of Saskatchewan. Both skyrocketed last year. Yes, the fertilizer business is raking in cash thanks to rising food demand from places like China. But there's an oil story too. High gasoline prices have driven up demand for ethanol fuel additives, and that's having big knock-on effects throughout agriculture, Mr. Heebner notes.
But the jewel in his crown right now? Petroleo Brasiliero, a.k.a. Petrobras.
The reason: The vast Tupi site it's exploring off the Brazilian coast. Mr. Heebner has been following the progress closely. He thinks Wall Street, and the rest of the oil industry, has yet to appreciate the potential fully. "This could be the biggest oil find in history," he says. "I'm seeing maybe the biggest investment I've ever seen in my life."
And although the Petrobras share price has more than doubled in the last year, Mr. Heebner argues it's still cheap compared to the potential.
Mutual fund regulations prevent CGM Focus from investing more than 5% of its money in Petrobras (although the stake can rise from there if the share price does).
Those looking for some oil action might be tempted to buy the stock. Obviously, individual equities come with the usual health warning. That's especially so for those based in emerging markets and engaged in long-term exploration.
The Brazilian government owns a controlling interest in Petrobras. Some, including Mr. Heebner, think that's a net positive for the company: The state has an economic incentive, after all, to treat Petrobras well. But of course such an arrangement can also be an awkward one. The interests of politicians don't always coincide with those of the stockholders. You can imagine scenarios, for example, where the company has its arm twisted to give away fuel cheaply shortly before an election. As usual, caveat emptor and keep your eyes open.
If you want a real gamble, take a look at out-of-the-money Petrobras call options.
These let you take a long-odds wager that the shares will skyrocket still further in the next year. You get the upside if the stock goes to the moon, but you lose your stake if it doesn't.
View call options like a lottery ticket. They're all or nothing. So you'd only ever wager a tiny amount.
Petrobras shares have leapt nearly 150% in a year to $117.58 recently. The January, 2009 call options at $155 cost $4.60 -- which means the most you can lose is $4.60, but if the shares rise above $159.60 you start making pure profit. (Early Friday, those $155 calls skyrocketed to $12, making them far too expensive. But you could consider the January 2009 $165 call options, which were trading at $6.50. That means you could lose up to $6.50 per option, but if the shares rise above $171.50 you start profiting.)
It's not a trade or an investment. It's a pure flutter.
Write to Brett Arends at brett.arends@wsj.com
Try talking to fund manager Ken Heebner instead.
He's been beating the street for around 40 years. So when he says he's found an oil play that "may be the biggest investment I've ever seen in my life," it makes me sit up and take notice.
Mr. Heebner trounced the rest of Wall Street last year. His CGM Focus Fund soared 80%. (I own CGMFX in my portfolio).
He is an oil bull, and remains so even with oil piercing such exalted levels. "I think the overall picture is one where oil is going to remain elevated, with an upward bias," he says.
His fund is betting that way. When we sat down recently for an end-of-year conversation, he conceded that if oil prices fell "I'd need a new portfolio."
But while Mr. Heebner is betting on oil, it's notable that he's been looking beyond the big headline stocks like ExxonMobil and Chevron.
Instead he's found ways to play the oil boom that have kept him ahead of the pack.
Like Vimpel Communications, a Russian cellular company, which is benefiting as that country's oil and gas bonanza feeds through into consumers' wallets.
And fertilizer companies Mosaic and Potash of Saskatchewan. Both skyrocketed last year. Yes, the fertilizer business is raking in cash thanks to rising food demand from places like China. But there's an oil story too. High gasoline prices have driven up demand for ethanol fuel additives, and that's having big knock-on effects throughout agriculture, Mr. Heebner notes.
But the jewel in his crown right now? Petroleo Brasiliero, a.k.a. Petrobras.
The reason: The vast Tupi site it's exploring off the Brazilian coast. Mr. Heebner has been following the progress closely. He thinks Wall Street, and the rest of the oil industry, has yet to appreciate the potential fully. "This could be the biggest oil find in history," he says. "I'm seeing maybe the biggest investment I've ever seen in my life."
And although the Petrobras share price has more than doubled in the last year, Mr. Heebner argues it's still cheap compared to the potential.
Mutual fund regulations prevent CGM Focus from investing more than 5% of its money in Petrobras (although the stake can rise from there if the share price does).
Those looking for some oil action might be tempted to buy the stock. Obviously, individual equities come with the usual health warning. That's especially so for those based in emerging markets and engaged in long-term exploration.
The Brazilian government owns a controlling interest in Petrobras. Some, including Mr. Heebner, think that's a net positive for the company: The state has an economic incentive, after all, to treat Petrobras well. But of course such an arrangement can also be an awkward one. The interests of politicians don't always coincide with those of the stockholders. You can imagine scenarios, for example, where the company has its arm twisted to give away fuel cheaply shortly before an election. As usual, caveat emptor and keep your eyes open.
If you want a real gamble, take a look at out-of-the-money Petrobras call options.
These let you take a long-odds wager that the shares will skyrocket still further in the next year. You get the upside if the stock goes to the moon, but you lose your stake if it doesn't.
View call options like a lottery ticket. They're all or nothing. So you'd only ever wager a tiny amount.
Petrobras shares have leapt nearly 150% in a year to $117.58 recently. The January, 2009 call options at $155 cost $4.60 -- which means the most you can lose is $4.60, but if the shares rise above $159.60 you start making pure profit. (Early Friday, those $155 calls skyrocketed to $12, making them far too expensive. But you could consider the January 2009 $165 call options, which were trading at $6.50. That means you could lose up to $6.50 per option, but if the shares rise above $171.50 you start profiting.)
It's not a trade or an investment. It's a pure flutter.
Write to Brett Arends at brett.arends@wsj.com
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