I Bought 100 shares here in the $98s as the stock has pulled back 6%; I continue to marvel at the price of this stock, which should be north of $120 in my book. Earnings are this Friday, and aside from the great story in potash, the story in phosphate might be even more unbelievable in the near term. I continue to believe this quarter's estimates of $0.95 are too low. Normally I don't buy anything ahead of earnings due to the heightened risk but, this is one I will bend that rule for.
Mosaic (MOS) is now a 5% stake in the fund, up from 4.2% entering the day. If the stock is dropped to $90 or so, I'll move this back up to a 6-8% type of position. If we ever see low $80s again it will probably go to a 10%+ position...
Note this is not a "technical" buy - the chart is actually showing a series of lower highs, so one might argue for the very near term it is actually a good short (which I could not argue with) but the focus in this fund is longer term fundamentals, and I can't find a space with better so I'll continue to layer in as the stock drops. Main concern with these type of "winning" stocks is hedge funds continuing to need to deleverage and sell what they can since they cannot sell the illiquid junk.
From seeking alpha
Monday, March 31, 2008
Monsanto Agrees to Buy De Ruiter Seeds
Monsanto Agrees to Buy De Ruiter Seeds for Roughly $862.7M Including Debt
ST. LOUIS (AP) -- Monsanto Co. said Monday it has agreed to acquire Netherlands-based De Ruiter Seeds Group BV, which produces seeds for the greenhouse market, for 546 million euros ($862.7 million) including debt.
Monsanto did not disclose the amount of the debt included in the purchase price.
De Ruiter Seeds, which had global sales of about 108 million euros ($170.6 million), works with crops such as tomatoes, cucumbers, melons, peppers and rootstock.
After the acquisition, Monsanto's vegetable seed business will include De Ruiter Seeds, which will serve the protected-culture vegetable seed market; Seminis, which will serve the open-field vegetable seed market; and the International Seed Group, which will serve customers of regional seed businesses.
Monsanto Chief Financial Officer Terry Crews, who serves as CEO of Seminis, said the acquisition is expected to help boost Monsanto's vegetable seed platform into a $1 billion revenue business by 2012.
Monsanto said it plans to finance the acquisition with cash. The deal is expected to add to earnings per share, cash flow and revenue growth by the second full fiscal year following its completion.
Monsanto said it has not determined a timeline for the closing of the transaction because it remains subject to review and approval by several European-based regulatory authorities, among others.
Monsanto shares dropped $4.13, or 3.6 percent, to $110.14 in afternoon trading. The stock has traded between $53.95 and $129.28 during the past 52 weeks.
ST. LOUIS (AP) -- Monsanto Co. said Monday it has agreed to acquire Netherlands-based De Ruiter Seeds Group BV, which produces seeds for the greenhouse market, for 546 million euros ($862.7 million) including debt.
Monsanto did not disclose the amount of the debt included in the purchase price.
De Ruiter Seeds, which had global sales of about 108 million euros ($170.6 million), works with crops such as tomatoes, cucumbers, melons, peppers and rootstock.
After the acquisition, Monsanto's vegetable seed business will include De Ruiter Seeds, which will serve the protected-culture vegetable seed market; Seminis, which will serve the open-field vegetable seed market; and the International Seed Group, which will serve customers of regional seed businesses.
Monsanto Chief Financial Officer Terry Crews, who serves as CEO of Seminis, said the acquisition is expected to help boost Monsanto's vegetable seed platform into a $1 billion revenue business by 2012.
Monsanto said it plans to finance the acquisition with cash. The deal is expected to add to earnings per share, cash flow and revenue growth by the second full fiscal year following its completion.
Monsanto said it has not determined a timeline for the closing of the transaction because it remains subject to review and approval by several European-based regulatory authorities, among others.
Monsanto shares dropped $4.13, or 3.6 percent, to $110.14 in afternoon trading. The stock has traded between $53.95 and $129.28 during the past 52 weeks.
Sector Snap: Agricultural Chemicals
Analyst Predicts Gains for Biotech Seed Companies, Following USDA Report
NEW YORK (AP) -- Shares of several agricultural chemical companies rose Monday morning as an analyst said companies stand to benefit from a decision among farmers to plant less corn.
Planting less corn is likely to drive corn prices even higher, which would boost sales for companies like Monsanto that make genetically modified corn seeds, which can boost yields.
The Department of Agriculture said farmers are expected to plant 86 million acres of corn this year, 8 percent lower than in 2007.
Favorable prices for other crops, like soybeans, have many farmers cutting back on how much corn they plant because of the high expense to grow the crop. Increasing demand worldwide for both food and ethanol has lifted the price of corn, which is used to make the renewable fuel.
Goldman Sachs analyst Robert Koort said the news bodes well for biotech seed companies, such as Monsanto Co.
"While we expect Monsanto to continue gaining market share, we believe the lower acreage bodes even better for DuPont shareholders as it increases the likelihood for DuPont to hold market share this year," Koort wrote in a client note.
Koort said corn prices will climb in the near term, as demand for ethanol rises and exports remain high because of the weak dollar.
DuPont Co. rose 55 cents to $46.99, and Dow Chemical Co. advanced 36 cents to $37.01.
Monsanto retreated 65 cents to $113.64.
Fertilizer companies Potash Corp. of Saskatchewan Inc. declined $2.14 to $158.43, and Mosaic Co. rose 47 cents to $105.87.
NEW YORK (AP) -- Shares of several agricultural chemical companies rose Monday morning as an analyst said companies stand to benefit from a decision among farmers to plant less corn.
Planting less corn is likely to drive corn prices even higher, which would boost sales for companies like Monsanto that make genetically modified corn seeds, which can boost yields.
The Department of Agriculture said farmers are expected to plant 86 million acres of corn this year, 8 percent lower than in 2007.
Favorable prices for other crops, like soybeans, have many farmers cutting back on how much corn they plant because of the high expense to grow the crop. Increasing demand worldwide for both food and ethanol has lifted the price of corn, which is used to make the renewable fuel.
Goldman Sachs analyst Robert Koort said the news bodes well for biotech seed companies, such as Monsanto Co.
"While we expect Monsanto to continue gaining market share, we believe the lower acreage bodes even better for DuPont shareholders as it increases the likelihood for DuPont to hold market share this year," Koort wrote in a client note.
Koort said corn prices will climb in the near term, as demand for ethanol rises and exports remain high because of the weak dollar.
DuPont Co. rose 55 cents to $46.99, and Dow Chemical Co. advanced 36 cents to $37.01.
Monsanto retreated 65 cents to $113.64.
Fertilizer companies Potash Corp. of Saskatchewan Inc. declined $2.14 to $158.43, and Mosaic Co. rose 47 cents to $105.87.
Israel Chem profit up, will raise fertiliser output
TEL AVIV, March 30 (Reuters) - Israel Chemicals (ICL) ICL.TA, a maker of fertilisers and specialty chemicals, beat expectations with an 82.5 percent rise in fourth-quarter net profit, boosted by record sales and high fertiliser prices.
ICL also said it plans to boost production of potash and phosphate rock between 2008 and 2011 due to rising demand for fertilisers.
The second-largest company listed on the Tel Aviv Stock Exchange by market value, ICL's quarterly net profit rose to a record $164.7 million from $90.2 million a year earlier.
Sales in the October-December period increased 44 percent to $1.211 billion from $839.6 million.
Analysts on average expected ICL to earn $144.5 million on revenue of $1.074 billion, according to a Reuters poll.
ICL said the rise in sales was driven by strong demand for fertilisers, leading to continued sharp rises in potash and phosphate fertiliser prices and significantly higher potash sales volume.
Its acquisition in August of Supresta, a maker of phosphorus-based flame retardants, contributed $68.8 million to sales in the quarter
ICL also said it plans to boost production of potash and phosphate rock between 2008 and 2011 due to rising demand for fertilisers.
The second-largest company listed on the Tel Aviv Stock Exchange by market value, ICL's quarterly net profit rose to a record $164.7 million from $90.2 million a year earlier.
Sales in the October-December period increased 44 percent to $1.211 billion from $839.6 million.
Analysts on average expected ICL to earn $144.5 million on revenue of $1.074 billion, according to a Reuters poll.
ICL said the rise in sales was driven by strong demand for fertilisers, leading to continued sharp rises in potash and phosphate fertiliser prices and significantly higher potash sales volume.
Its acquisition in August of Supresta, a maker of phosphorus-based flame retardants, contributed $68.8 million to sales in the quarter
Saturday, March 29, 2008
Current Leaders Portend Trouble Ahead
Even in a bear market, there are certain groups and stocks that do well. Sometimes they do extraordinarily well. It's is just as true for this market as it was in previous bad markets. Right now there are several groups that are working very well indeed. I think those groups tell us a lot about what we can expect going forward.
It is no great secret that the U.S. economy is on the edge of a recession, if not already in one. Under such an economic backdrop, the blue-chip staples stocks have traditionally been the leaders. Beer, food distributors, cigarette companies and the like -- companies that sell products that people buy no matter what -- would be the leaders. They are not this time.
All That Glitters
What is hot? Gold, for one thing. Gold itself and the gold mining stocks have been on fire this year. In just the last six months, gold prices have risen about 24%. Gold stocks have taken off as well. Barrick Gold has risen 75% in the last 12 months. Goldcorp is up 60% in the same time frame.
Gold prices traditionally have risen in periods of inflation, not recession. The weakness of the dollar has helped fuel the rise, as have investors who would rather hold a hard asset than depreciating paper assets. The recent rate cuts by the Fed will likely help gold continue to rally in the months ahead.
The price of gold had retreated a little in the last few weeks, but that appears to have had more to do with hedge fund deleveraging than market fundamentals. In the past few days, the shiny metal has resumed its upward march. That really does not bode well for the inflation outlook, in the U.S. or globally.
A Jolt of Energy
Oil and other energy-related groups are also moving upward. Oil has gone up 21% in just the last three months. In the last 12 months, the price of oil has just about doubled.
Apache is up 68% in the last year. Oil stocks have also flown upward. Anadarko is up 59% and Hess has risen a whopping 77%. Gas prices are up 60% in the last year.
Even previously unloved natural gas has gotten into the game recently, rising better than 30% since the start of 2008. As a result, natural gas stocks have joined the party. EOG Resources is up a whopping 76% in the past 12 months. Chesapeake Energy has risen 50% over that time.
Growing Profits
Another area that has given spectacular returns is fertilizer and fertilizer stocks. In the past four years, fertilizer prices have more than doubled. Fueled by increased global demand driven by growing needs for food, feed and biofuel, the companies that produce the various types of fertilizer have exploded. Mosaic has tripled in the past year. Potash is up more than 200%. Agrium , a real laggard, is only up 92% over that time frame.
I talked to a friend who has a farm, and he told me that the salespeople now tell him how much is he is ordering at a particular time. Demand is so strong he either takes what he is offered or he gets none. Global population is continuing to expand. The forecasts I have read say that the demand for fertilizer products will stay strong for the foreseeable future.
So What?
This is wonderful if you have been fortunate enough to be invested in these groups and these stocks. It is much less so if you are an ordinary stock investor. Each of these red-hot sectors historically has negative correlation with the greater indices. When they go up, it is an indication that stock prices as a whole are likely to decline.
The bad news is that they are going up much faster than stocks have been going down of late. The last time we had these types of accelerated moves in gold and energy in a weak economy, the market collapsed in a bear market of historic proportions. In years past, decreased demand from the U.S. would cause price declines. With the U.S. share of global GDP dropping from almost 60% 25 years ago to 25% today, that is not necessarily true. Demand form a developing middle class in emerging markets such as China and Brazil could act to keep prices high while we slip into a recession, truly the worst possible scenario for U.S. consumers and stock prices.
Can the market bottom and move higher even as the economy weakens and prices of key commodities rise? I suppose it is possible, but I am not going to bet my money on it.
It is no great secret that the U.S. economy is on the edge of a recession, if not already in one. Under such an economic backdrop, the blue-chip staples stocks have traditionally been the leaders. Beer, food distributors, cigarette companies and the like -- companies that sell products that people buy no matter what -- would be the leaders. They are not this time.
All That Glitters
What is hot? Gold, for one thing. Gold itself and the gold mining stocks have been on fire this year. In just the last six months, gold prices have risen about 24%. Gold stocks have taken off as well. Barrick Gold has risen 75% in the last 12 months. Goldcorp is up 60% in the same time frame.
Gold prices traditionally have risen in periods of inflation, not recession. The weakness of the dollar has helped fuel the rise, as have investors who would rather hold a hard asset than depreciating paper assets. The recent rate cuts by the Fed will likely help gold continue to rally in the months ahead.
The price of gold had retreated a little in the last few weeks, but that appears to have had more to do with hedge fund deleveraging than market fundamentals. In the past few days, the shiny metal has resumed its upward march. That really does not bode well for the inflation outlook, in the U.S. or globally.
A Jolt of Energy
Oil and other energy-related groups are also moving upward. Oil has gone up 21% in just the last three months. In the last 12 months, the price of oil has just about doubled.
Apache is up 68% in the last year. Oil stocks have also flown upward. Anadarko is up 59% and Hess has risen a whopping 77%. Gas prices are up 60% in the last year.
Even previously unloved natural gas has gotten into the game recently, rising better than 30% since the start of 2008. As a result, natural gas stocks have joined the party. EOG Resources is up a whopping 76% in the past 12 months. Chesapeake Energy has risen 50% over that time.
Growing Profits
Another area that has given spectacular returns is fertilizer and fertilizer stocks. In the past four years, fertilizer prices have more than doubled. Fueled by increased global demand driven by growing needs for food, feed and biofuel, the companies that produce the various types of fertilizer have exploded. Mosaic has tripled in the past year. Potash is up more than 200%. Agrium , a real laggard, is only up 92% over that time frame.
I talked to a friend who has a farm, and he told me that the salespeople now tell him how much is he is ordering at a particular time. Demand is so strong he either takes what he is offered or he gets none. Global population is continuing to expand. The forecasts I have read say that the demand for fertilizer products will stay strong for the foreseeable future.
So What?
This is wonderful if you have been fortunate enough to be invested in these groups and these stocks. It is much less so if you are an ordinary stock investor. Each of these red-hot sectors historically has negative correlation with the greater indices. When they go up, it is an indication that stock prices as a whole are likely to decline.
The bad news is that they are going up much faster than stocks have been going down of late. The last time we had these types of accelerated moves in gold and energy in a weak economy, the market collapsed in a bear market of historic proportions. In years past, decreased demand from the U.S. would cause price declines. With the U.S. share of global GDP dropping from almost 60% 25 years ago to 25% today, that is not necessarily true. Demand form a developing middle class in emerging markets such as China and Brazil could act to keep prices high while we slip into a recession, truly the worst possible scenario for U.S. consumers and stock prices.
Can the market bottom and move higher even as the economy weakens and prices of key commodities rise? I suppose it is possible, but I am not going to bet my money on it.
Don't Just Blame the Shorts for Pulling the Market Down
Right off the bat, I should let you know that I never sell stocks short, and probably never will. However, the fact that so many people vilify short-sellers strikes me as naive and short-sighted.
Beyond the fact that it's psychologically challenging to bet against a stock (and that's probably where the villainous, moustache-twirling, dark-cape-wearing stereotype of a short-seller comes in), I've got two opinions on the subject:
I'm terrified of short-selling, and would never do it. Even if you're not "wrong," just poorly timed, you can lose your shirt. Plus, your losses can be much more devastating than a long position gone wrong. (Short squeezes can't be fun, either!)
Even though I think short-selling is a risky practice, in the long run, the fact that short-sellers exist is good for an efficient marketplace.
But there's an awful lot of buzz these days, a tendency to blame the shorts when stocks go down. Shorts do profit when the stocks they've chosen go down in price.
Indulge your inner short-seller
Our community-intelligence database, Motley Fool CAPS, can give a good feel for just how damaging a poor or ill-timed short sale can be. A couple of years ago, I was not alone here at the Fool in thinking Crocs (Nasdaq: CROX) was overpriced, even ridiculously so. CAPS allowed me to simulate "shorting" the stock by putting an "underperform" call on it in November 2006.
At one point, I was 200 points in the hole with that call. The story has a happy ending (for my CAPS score anyway); I took my lumps for ages, and ended my pick this past February, when I had a score of positive nine points on my Crocs "underperform." (True, it's not much of a gain, but it is a dramatic reversal.)
Of course, I've got some other rather calamitous CAPS "shorts" right now, such as my brilliant "underperform" on Monsanto (NYSE: MON), a company I've never been too fond of given some practices I find controversial. Of course, what I didn't see coming was the corn boom -- my Monsanto score is currently down 163 points. Ouch. (I'm happy to say, though, that despite that bad call and a few others, as of this writing, I'm still holding on to CAPS All-Star status.)
You're just short -- not that there's anything wrong with that
It would be hard these days to admit in polite company that you've sold a stock short. This morning on CNBC, I even saw Jim Cramer railing about short-sellers plotting against financial stocks like Lehman Brothers (NYSE: LEH) and Merrill Lynch (NYSE: MER). Come on, though, aren't there plenty of good reasons why people might be worried about those companies' problems?
Along related lines, I saw a Reuters article yesterday where a spokesperson for Lehman commented about the stock's drop, and this quote shocked me: "There are a lot of rumors in the marketplace that are totally unfounded. We are suspicious that the rumors are being promulgated by short-sellers of our stock that have an economic self-interest."
Isn't "economic self-interest" what all of us have, if we have any interest in stocks at all? It's not like there are never positive (and just as unfounded) rumors that float around, occasionally sending stocks skyward for no real reason.
Here's an oldie but a goodie from 2004: The rumor went around that TiVo (Nasdaq: TIVO) and Netflix (Nasdaq: NFLX) would hook up to bring downloaded movies through the TiVo box. At the time, an anonymous source said it was "all but a done deal," yet here we are, and that long-rumored event never came to pass.
Earplugs are for rock concerts, not investing
Blaming "the shorts" seems to be an increasingly popular pastime. I guess it's partly human nature to dislike negativity, especially when it relates to your finances, but investing really does require fighting against certain psychological pitfalls -- like the urge to plug your ears to bad news or risks, for example. I believe every investor should strive to carefully weigh not only the positives of their stocks, but the negatives, too. Being blind to bearish opinions -- or worse, outraged by them -- is a terrible way to run your portfolio.
And of course, without short-selling, stock prices would reflect only optimism. Does that sound rational to you? We might not like to hear what the bears have to say, but good or bad, it's all information, and it's a mistake to ignore it out of hand. (My previous example about CAPS is a great example of polling such sentiment, both positive and negative.)
I think it's better to examine all the data you can get your hands on and figure out where you stand on stocks. If you're invested in solid, well-run companies, you've calmly and rationally assessed the risks, and you're prepared to stick around for the long term, then I'm betting you have little to fear from short-sellers' alleged villainy.
Beyond the fact that it's psychologically challenging to bet against a stock (and that's probably where the villainous, moustache-twirling, dark-cape-wearing stereotype of a short-seller comes in), I've got two opinions on the subject:
I'm terrified of short-selling, and would never do it. Even if you're not "wrong," just poorly timed, you can lose your shirt. Plus, your losses can be much more devastating than a long position gone wrong. (Short squeezes can't be fun, either!)
Even though I think short-selling is a risky practice, in the long run, the fact that short-sellers exist is good for an efficient marketplace.
But there's an awful lot of buzz these days, a tendency to blame the shorts when stocks go down. Shorts do profit when the stocks they've chosen go down in price.
Indulge your inner short-seller
Our community-intelligence database, Motley Fool CAPS, can give a good feel for just how damaging a poor or ill-timed short sale can be. A couple of years ago, I was not alone here at the Fool in thinking Crocs (Nasdaq: CROX) was overpriced, even ridiculously so. CAPS allowed me to simulate "shorting" the stock by putting an "underperform" call on it in November 2006.
At one point, I was 200 points in the hole with that call. The story has a happy ending (for my CAPS score anyway); I took my lumps for ages, and ended my pick this past February, when I had a score of positive nine points on my Crocs "underperform." (True, it's not much of a gain, but it is a dramatic reversal.)
Of course, I've got some other rather calamitous CAPS "shorts" right now, such as my brilliant "underperform" on Monsanto (NYSE: MON), a company I've never been too fond of given some practices I find controversial. Of course, what I didn't see coming was the corn boom -- my Monsanto score is currently down 163 points. Ouch. (I'm happy to say, though, that despite that bad call and a few others, as of this writing, I'm still holding on to CAPS All-Star status.)
You're just short -- not that there's anything wrong with that
It would be hard these days to admit in polite company that you've sold a stock short. This morning on CNBC, I even saw Jim Cramer railing about short-sellers plotting against financial stocks like Lehman Brothers (NYSE: LEH) and Merrill Lynch (NYSE: MER). Come on, though, aren't there plenty of good reasons why people might be worried about those companies' problems?
Along related lines, I saw a Reuters article yesterday where a spokesperson for Lehman commented about the stock's drop, and this quote shocked me: "There are a lot of rumors in the marketplace that are totally unfounded. We are suspicious that the rumors are being promulgated by short-sellers of our stock that have an economic self-interest."
Isn't "economic self-interest" what all of us have, if we have any interest in stocks at all? It's not like there are never positive (and just as unfounded) rumors that float around, occasionally sending stocks skyward for no real reason.
Here's an oldie but a goodie from 2004: The rumor went around that TiVo (Nasdaq: TIVO) and Netflix (Nasdaq: NFLX) would hook up to bring downloaded movies through the TiVo box. At the time, an anonymous source said it was "all but a done deal," yet here we are, and that long-rumored event never came to pass.
Earplugs are for rock concerts, not investing
Blaming "the shorts" seems to be an increasingly popular pastime. I guess it's partly human nature to dislike negativity, especially when it relates to your finances, but investing really does require fighting against certain psychological pitfalls -- like the urge to plug your ears to bad news or risks, for example. I believe every investor should strive to carefully weigh not only the positives of their stocks, but the negatives, too. Being blind to bearish opinions -- or worse, outraged by them -- is a terrible way to run your portfolio.
And of course, without short-selling, stock prices would reflect only optimism. Does that sound rational to you? We might not like to hear what the bears have to say, but good or bad, it's all information, and it's a mistake to ignore it out of hand. (My previous example about CAPS is a great example of polling such sentiment, both positive and negative.)
I think it's better to examine all the data you can get your hands on and figure out where you stand on stocks. If you're invested in solid, well-run companies, you've calmly and rationally assessed the risks, and you're prepared to stick around for the long term, then I'm betting you have little to fear from short-sellers' alleged villainy.
How Expensive is the Food for Food?
I want to share my opinion in answer to a few questions I've received about the increased margin requirements imposed by the Chicago Mercantile Exchange (CME) for crops of agriculture futures. This is one of a few tremendous clues in March alone to solve the mystery of whether or not our long positions in a worldwide food fight are in jeopardy. You don’t get a much better test than removing certain speculators from bidding (increased margin requirements) combined with relentless efforts to control prices (crippling export taxes for farming countries).
There is true confusion in many markets right now. According to anybody I heard explain it, the announcement should have caused a violent sell-off of agricultural futures. And the Dow Jones-AIG Commodity Index is actually up on the week as I type this.Make no mistake, the reduction in credit lines will affect all markets - levered longs in agricultural included. I've said since January I believe when this period ultimately gets written about, the stories of over-margined “smart money” will trump that of any group of over-mortgaged homeowners. Looking Through a Different LensFor some much needed perspective, two pictures can speak loudly on the topic of just how high we went, and now how far we’ve fallen. Historically, in a 40+year inflation adjusted chart of Soybeans (to name one of many examples that look just like this) the bubble gets harder to find.
As for the much needed and severe correction in the price of most commodities this month, below is the “historic reversal” in that Bean. In this case all the way back to levels unseen since - January 31, 2008.
Commodity prices have additional pressure from a growing roster of farming countries. Argentina, for example, imposed major export taxes in an effort to keep supplies at home to combat soaring food costs. Naturally, a crop growing even faster -- capitalists -- rioted because they want to sell at the highest price available. We’ll stand by our ridiculous -- at the time -- prediction of four years ago that now seems unfortunately safe: we’ll see more domestic fights over food than oil. In the U.S., food costs rising a few percentage points in a year is a big deal. In some countries, spikes are far higher and are a life or death deal. Fertilizing those crops is costing a few percentage points more every couple of weeks.
I've written about these ever since Minyanville added this funny looking farmer to its roster. For those able to trade in foreign markets, it becomes even more interesting when you can locate a fertilizer plant right next to substantially cheaper natural gas - which is the primary input cost to manufacture this stuff.If commodities are now a busted bubble then it will be breaking 250 years of history. If this bull dies now, it would be less than half way toward average CRB price moves and one-third the duration of the prior six major bull markets. That data excludes the fact that in none of those periods did I find a few billion new capitalists to feed.Yes, some agricultural commodities and stocks have every reason in the world to sell off - and they did.
But the action afterwards has thus far been even more striking. I've been in the minority in believing that at least in the agricultural space, this is not a rally based on dollar weakness or speculation. Although those factors have certainly played a role, the view through most of my lenses indicate that strength is based on demand and one other factor hardly ever discussed next to explanations of the rally - supply. Perhaps still a misunderstood piece of this puzzle is acreage, so I thought I’d share some terribly simple perspective. The swelling demand for beans and wheat, just to name two, is matched up against a supply from
U.S. farms that was planted on about 10 million fewer acres than just ten years ago. Now that's some food for thought.
There is true confusion in many markets right now. According to anybody I heard explain it, the announcement should have caused a violent sell-off of agricultural futures. And the Dow Jones-AIG Commodity Index is actually up on the week as I type this.Make no mistake, the reduction in credit lines will affect all markets - levered longs in agricultural included. I've said since January I believe when this period ultimately gets written about, the stories of over-margined “smart money” will trump that of any group of over-mortgaged homeowners. Looking Through a Different LensFor some much needed perspective, two pictures can speak loudly on the topic of just how high we went, and now how far we’ve fallen. Historically, in a 40+year inflation adjusted chart of Soybeans (to name one of many examples that look just like this) the bubble gets harder to find.
As for the much needed and severe correction in the price of most commodities this month, below is the “historic reversal” in that Bean. In this case all the way back to levels unseen since - January 31, 2008.
Commodity prices have additional pressure from a growing roster of farming countries. Argentina, for example, imposed major export taxes in an effort to keep supplies at home to combat soaring food costs. Naturally, a crop growing even faster -- capitalists -- rioted because they want to sell at the highest price available. We’ll stand by our ridiculous -- at the time -- prediction of four years ago that now seems unfortunately safe: we’ll see more domestic fights over food than oil. In the U.S., food costs rising a few percentage points in a year is a big deal. In some countries, spikes are far higher and are a life or death deal. Fertilizing those crops is costing a few percentage points more every couple of weeks.
I've written about these ever since Minyanville added this funny looking farmer to its roster. For those able to trade in foreign markets, it becomes even more interesting when you can locate a fertilizer plant right next to substantially cheaper natural gas - which is the primary input cost to manufacture this stuff.If commodities are now a busted bubble then it will be breaking 250 years of history. If this bull dies now, it would be less than half way toward average CRB price moves and one-third the duration of the prior six major bull markets. That data excludes the fact that in none of those periods did I find a few billion new capitalists to feed.Yes, some agricultural commodities and stocks have every reason in the world to sell off - and they did.
But the action afterwards has thus far been even more striking. I've been in the minority in believing that at least in the agricultural space, this is not a rally based on dollar weakness or speculation. Although those factors have certainly played a role, the view through most of my lenses indicate that strength is based on demand and one other factor hardly ever discussed next to explanations of the rally - supply. Perhaps still a misunderstood piece of this puzzle is acreage, so I thought I’d share some terribly simple perspective. The swelling demand for beans and wheat, just to name two, is matched up against a supply from
U.S. farms that was planted on about 10 million fewer acres than just ten years ago. Now that's some food for thought.
Sector Snap: Farm Equipment
Farm Equipment Shares Rise Ahead of USDA Planting Report
NEW YORK (AP) -- Shares of farm equipment companies rose Friday ahead of the U.S. Department of Agriculture's release of a report detailing planting predictions for the upcoming growing season.
The report, which is scheduled to be released Monday, will provide an initial look at how farmers plan to use their land in 2008.
The size of the crop, along with prices of specific crops such as corn, is generally seen as an indicator of how farm equipment companies could expect to do this year.
In afternoon trading, Deere & Co. rose $1.45 to $80.60. They earlier traded as high as $81.43.
Agco Corp. shares rose 50 cents to $61.17 in afternoon trading, but earlier changed hands as high as $62.35. CNH Global NV was up 87 cents to $51.75, after earlier trading at $53.
NEW YORK (AP) -- Shares of farm equipment companies rose Friday ahead of the U.S. Department of Agriculture's release of a report detailing planting predictions for the upcoming growing season.
The report, which is scheduled to be released Monday, will provide an initial look at how farmers plan to use their land in 2008.
The size of the crop, along with prices of specific crops such as corn, is generally seen as an indicator of how farm equipment companies could expect to do this year.
In afternoon trading, Deere & Co. rose $1.45 to $80.60. They earlier traded as high as $81.43.
Agco Corp. shares rose 50 cents to $61.17 in afternoon trading, but earlier changed hands as high as $62.35. CNH Global NV was up 87 cents to $51.75, after earlier trading at $53.
Wednesday, March 26, 2008
Monsanto's Guidance Grows Like a Weed
It's a new month, so like clockwork, we get another press release from Monsanto (NYSE: MON) announcing higher guidance. The agricultural giant isn't sending out nickel-and-dime information to get free media coverage. These guidance increases are legitimate reasons to let investors know that it's doing well.
Full-Year Guidance Low-End Increase
Jan. $2.50 to $2.60 14%
Feb. $2.70 to $2.80 8%
March $3.15 to $3.25 17%
The January increase in guidance came in conjunction with Monsanto's stellar fiscal-first-quarter results, as sales in the Southern Hemisphere came in better than expected.
February's increase came in conjunction with the company's presentation at Goldman Sachs' 2008 AgForum Conference -- you've got to give the analysts something to chew on. Increased sales of RoundUp herbicides, as well as corn and soybean seed sales, caused the expected uptick in earnings.
Some of the most recent bump in guidance -- $0.23 per share, to be exact -- comes from money
Monsanto receives in conjunction with its spinoff Solutia's (NYSE: SOA) emergence from bankruptcy. That's a one-time event, but there's still quite a bit of revenue growth baked into the rest of the guidance bump.
The company expects sales of both seeds and RoundUp to increase even more than previously expected. The increased global demand for RoundUp likely means that additional acres are being planted, which bodes well for DuPont (NYSE: DD), Potash (NYSE: POT), Mosaic (NYSE: MOS), and the rest of the agriculture industry.
Monsanto is now looking for full-year earnings more than 50% greater than last fiscal year's adjusted earnings. While that's great in the near term -- it's pushed Monsanto's stock up nearly 30% since last year's financials were released -- I'm not sure it can last. The company's short-term growth is tied to commodity prices. I'm not willing to call the top of the commodity bull market, but it has to end eventually ... doesn't it?
Full-Year Guidance Low-End Increase
Jan. $2.50 to $2.60 14%
Feb. $2.70 to $2.80 8%
March $3.15 to $3.25 17%
The January increase in guidance came in conjunction with Monsanto's stellar fiscal-first-quarter results, as sales in the Southern Hemisphere came in better than expected.
February's increase came in conjunction with the company's presentation at Goldman Sachs' 2008 AgForum Conference -- you've got to give the analysts something to chew on. Increased sales of RoundUp herbicides, as well as corn and soybean seed sales, caused the expected uptick in earnings.
Some of the most recent bump in guidance -- $0.23 per share, to be exact -- comes from money
Monsanto receives in conjunction with its spinoff Solutia's (NYSE: SOA) emergence from bankruptcy. That's a one-time event, but there's still quite a bit of revenue growth baked into the rest of the guidance bump.
The company expects sales of both seeds and RoundUp to increase even more than previously expected. The increased global demand for RoundUp likely means that additional acres are being planted, which bodes well for DuPont (NYSE: DD), Potash (NYSE: POT), Mosaic (NYSE: MOS), and the rest of the agriculture industry.
Monsanto is now looking for full-year earnings more than 50% greater than last fiscal year's adjusted earnings. While that's great in the near term -- it's pushed Monsanto's stock up nearly 30% since last year's financials were released -- I'm not sure it can last. The company's short-term growth is tied to commodity prices. I'm not willing to call the top of the commodity bull market, but it has to end eventually ... doesn't it?
Jim Cramer's Stop Trading! 3/25/08
Tuesday, March 25, 2008
Outlook Roundup: Anadarko, Monsanto
Outlook Roundup: Anadarko Lifts Production Target, Monsanto Shares Climb Nearly 10 Percent
Among the earnings projection stories for Tuesday, March 25, from AP Financial News:
HOUSTON (AP) -- Anadarko Petroleum Corp. on Tuesday increased its production target for 2008 as the oil producer takes advantage of higher-than-expected commodity prices.
ST. LOUIS (AP) -- Monsanto Co. shares jumped nearly 10 percent Tuesday after the agricultural products company said earnings per share for the second quarter and for all of fiscal 2008 will be stronger than originally projected.
ST. PETERSBURG, Fla. (AP) -- Electronic parts manufacturer Jabil Circuit Inc. said Tuesday it expects fiscal third-quarter profit below Wall Street estimates, citing the slowdown in the U.S. economy.
Among the earnings projection stories for Tuesday, March 25, from AP Financial News:
HOUSTON (AP) -- Anadarko Petroleum Corp. on Tuesday increased its production target for 2008 as the oil producer takes advantage of higher-than-expected commodity prices.
ST. LOUIS (AP) -- Monsanto Co. shares jumped nearly 10 percent Tuesday after the agricultural products company said earnings per share for the second quarter and for all of fiscal 2008 will be stronger than originally projected.
ST. PETERSBURG, Fla. (AP) -- Electronic parts manufacturer Jabil Circuit Inc. said Tuesday it expects fiscal third-quarter profit below Wall Street estimates, citing the slowdown in the U.S. economy.
S&P 500 Leaders & Laggards: MON MTG
Monsanto Helps Send Standard & Poor's 500 to a Higher Close, Following Higher Earnings Outlook
NEW YORK (AP) -- The Standard & Poor's 500 index edged higher Tuesday, helped in part by Monsanto Co., which spiked after lifting its outlook.
The S&P 500 gained 3.11 points to 1,352.99.
Monsanto rose $10.28, or 9.9 percent, to $114.54. The agricultural products company boosted its earnings forecast for the second quarter and 2008, partly on strong performance in its herbicide business.
General Growth Properties Inc. rose $2.74, or 7.2 percent, to $41. To repay debt, the real estate investment trust plans to sell 22.8 million shares at $36 apiece.
Oil services provider BJ Services Co. rose $1.70, or 6.9 percent, to $26.43.
Among the decliners, shares of MGIC Investment Corp. dropped $1.05, or 7.9 percent, to $12.25. The nation's largest mortgage insurer said it will boost its public offering by 20 percent to raise additional cash.
Clear Channel Communications Inc. declined $1.89, or 5.5 percent, to $32.56, following a report that its buyout by private-equity firms may not follow through as planned.
Public Storage lost $4.29, or 4.5 percent, to $90.21, following a downgrade of the self-storage company.
NEW YORK (AP) -- The Standard & Poor's 500 index edged higher Tuesday, helped in part by Monsanto Co., which spiked after lifting its outlook.
The S&P 500 gained 3.11 points to 1,352.99.
Monsanto rose $10.28, or 9.9 percent, to $114.54. The agricultural products company boosted its earnings forecast for the second quarter and 2008, partly on strong performance in its herbicide business.
General Growth Properties Inc. rose $2.74, or 7.2 percent, to $41. To repay debt, the real estate investment trust plans to sell 22.8 million shares at $36 apiece.
Oil services provider BJ Services Co. rose $1.70, or 6.9 percent, to $26.43.
Among the decliners, shares of MGIC Investment Corp. dropped $1.05, or 7.9 percent, to $12.25. The nation's largest mortgage insurer said it will boost its public offering by 20 percent to raise additional cash.
Clear Channel Communications Inc. declined $1.89, or 5.5 percent, to $32.56, following a report that its buyout by private-equity firms may not follow through as planned.
Public Storage lost $4.29, or 4.5 percent, to $90.21, following a downgrade of the self-storage company.
Monsanto Boosts Guidance, Shares Climb
Monsanto Now Expects Stronger Earnings in 2008, Shares Rise More Than 9 Pct
ST. LOUIS (AP) -- Monsanto Co. shares jumped nearly 10 percent Tuesday after the agricultural products company said earnings per share for the second quarter and for all of fiscal 2008 will be stronger than originally projected.
St. Louis-based Monsanto said its seeds and traits business will contribute more than expected to profit due to brand share growth and increased volume in the soybean business. Meanwhile, Monsanto said its Roundup and other herbicides have performed well in the second quarter, with demand exceeding supply.
Monsanto now projects that its full-year earnings per share will be in the range of $3.38 to $3.48, including a gain of 23 cents per share for a settlement of claims related to subsidiary Solutia's emergence from bankruptcy.
Excluding the gain, the expected earnings per share range from $3.15 to $3.25. The company previously expected full-year earnings per share of $2.70 to $2.80. Analysts expect full-year earnings of $2.87 per share.
Monsanto projected that its second-quarter profit will top Wall Street expectations when released on April 2. The company expects second-quarter earnings per share of $1.98, including the 23-cent gain. Excluding the gain, the company expects earnings of $1.75 per share. Analysts predicted second-quarter earnings per share of $1.34.
Shares of Monsanto rose $10.28, or 9.9 percent, to close at $114.54 Tuesday.
"Our growth over the next five years will be built on our seeds-and-traits platform, and we've already exceeded a number of milestones that put us ahead of our plan to deliver consistent, sustainable growth," said Hugh Grant, Monsanto's chairman, president and chief executive officer.
Monsanto now expects its seeds and traits business to achieve gross profit of $3.6 billion to $3.7 billion for fiscal 2008, up 20 percent from the previous year.
Banc of America Securities reiterated Monsanto as a "buy" in an analyst report, saying it views the company as a "well-managed leader in agricultural biotechnology with numerous, sustainable growth drivers" in biotech seeds and an unside in herbicides.
Buckingham Research Group raised its estimate for Monsanto's second quarter earnings per share to $1.75 from $1.30 after the company's announcement, and raised its full-year estimate to $3.25 per share from $2.80 per share.
ST. LOUIS (AP) -- Monsanto Co. shares jumped nearly 10 percent Tuesday after the agricultural products company said earnings per share for the second quarter and for all of fiscal 2008 will be stronger than originally projected.
St. Louis-based Monsanto said its seeds and traits business will contribute more than expected to profit due to brand share growth and increased volume in the soybean business. Meanwhile, Monsanto said its Roundup and other herbicides have performed well in the second quarter, with demand exceeding supply.
Monsanto now projects that its full-year earnings per share will be in the range of $3.38 to $3.48, including a gain of 23 cents per share for a settlement of claims related to subsidiary Solutia's emergence from bankruptcy.
Excluding the gain, the expected earnings per share range from $3.15 to $3.25. The company previously expected full-year earnings per share of $2.70 to $2.80. Analysts expect full-year earnings of $2.87 per share.
Monsanto projected that its second-quarter profit will top Wall Street expectations when released on April 2. The company expects second-quarter earnings per share of $1.98, including the 23-cent gain. Excluding the gain, the company expects earnings of $1.75 per share. Analysts predicted second-quarter earnings per share of $1.34.
Shares of Monsanto rose $10.28, or 9.9 percent, to close at $114.54 Tuesday.
"Our growth over the next five years will be built on our seeds-and-traits platform, and we've already exceeded a number of milestones that put us ahead of our plan to deliver consistent, sustainable growth," said Hugh Grant, Monsanto's chairman, president and chief executive officer.
Monsanto now expects its seeds and traits business to achieve gross profit of $3.6 billion to $3.7 billion for fiscal 2008, up 20 percent from the previous year.
Banc of America Securities reiterated Monsanto as a "buy" in an analyst report, saying it views the company as a "well-managed leader in agricultural biotechnology with numerous, sustainable growth drivers" in biotech seeds and an unside in herbicides.
Buckingham Research Group raised its estimate for Monsanto's second quarter earnings per share to $1.75 from $1.30 after the company's announcement, and raised its full-year estimate to $3.25 per share from $2.80 per share.
Monday, March 24, 2008
Russia-India deal boosts potash price forecasts
WINNIPEG, Manitoba, March 24 (Reuters) - North American potash producers are eyeing even higher prices in the hot world fertilizer market after Russian competitors signed a major deal with India last week, analysts said on Monday.
"It's significant news for the potash market around the world," said Ashley Harris, manager of investor relations with Agrium Inc (AGU.TO: Quote, Profile, Research).
"It definitely sets a precedent about the types of increases expected," Harris said.
India typically negotiates yearly deals after China, the world's largest volume importer, inks its annual contract. China normally buys at a discount to prices paid by importers in other markets like Brazil and southeast Asia.
But tight world potash supplies combined with pressures to control food inflation this year have prompted India to leapfrog ahead of China to secure annual supplies with Belarussian Potash Co, which trades for Uralkali (URKA.MM: Quote, Profile, Research) and Belaruskali.
The deal was done at the going spot market price of $625 per tonne (delivered) -- more than double last year's contract price of $270 per tonne.
Canadian producers Potash Corp (POT.TO: Quote, Profile, Research), Mosaic Co (MOS.N: Quote, Profile, Research) and Agrium negotiate export deals to India and China jointly at values that are usually similar or higher to the Russians.
"I expect that China, being the largest buyer in the world, would buy at a discount to this (India price), but it definitely sets something of a benchmark," Harris said.
Potash Corp stock was up 5 percent, or C$7.26, at C$154.83 and Agrium was up C$2.45 at C$65.25 on the Toronto Stock Exchange, with Mosaic up $3.30 at $95.31 on the New York Stock Exchange.
RBC Capital Markets upgraded top volume producer Potash Corp to a "top pick" because of the India deal.
"We expect the Indian contract settlement to lead to a substantial price increase in China," analyst Fai Lee said in a note to clients.
JP Morgan analyst David Silver said he now expects potash producers to negotiate a price hike of $200 to $250 per tonne to China from his 2007 estimated price of $260 per tonne -- up from his earlier estimate of a $150-$200 per tonne increase.
"North American potash stocks remain near record lows, and major suppliers are essentially sold out," Silver said in a research note.
Food inflation pressures could force China to settle its contract next month, said a fertilizer analyst who declined to be named, although the country has enough inventory to wait until May or June for a new deal.
The fertilizer analyst expected China would continue to get a discount to world prices because producers don't want to risk losing a buyer with 10 million tonnes of annual consumption.
"To think that Brazil, India and southeast Asia ... could easily take that up for the next five years is wishful thinking," he said.
But a steep discount for China would cap miners' ability to eke out further price increases from other buyers, he noted
"It's significant news for the potash market around the world," said Ashley Harris, manager of investor relations with Agrium Inc (AGU.TO: Quote, Profile, Research).
"It definitely sets a precedent about the types of increases expected," Harris said.
India typically negotiates yearly deals after China, the world's largest volume importer, inks its annual contract. China normally buys at a discount to prices paid by importers in other markets like Brazil and southeast Asia.
But tight world potash supplies combined with pressures to control food inflation this year have prompted India to leapfrog ahead of China to secure annual supplies with Belarussian Potash Co, which trades for Uralkali (URKA.MM: Quote, Profile, Research) and Belaruskali.
The deal was done at the going spot market price of $625 per tonne (delivered) -- more than double last year's contract price of $270 per tonne.
Canadian producers Potash Corp (POT.TO: Quote, Profile, Research), Mosaic Co (MOS.N: Quote, Profile, Research) and Agrium negotiate export deals to India and China jointly at values that are usually similar or higher to the Russians.
"I expect that China, being the largest buyer in the world, would buy at a discount to this (India price), but it definitely sets something of a benchmark," Harris said.
Potash Corp stock was up 5 percent, or C$7.26, at C$154.83 and Agrium was up C$2.45 at C$65.25 on the Toronto Stock Exchange, with Mosaic up $3.30 at $95.31 on the New York Stock Exchange.
RBC Capital Markets upgraded top volume producer Potash Corp to a "top pick" because of the India deal.
"We expect the Indian contract settlement to lead to a substantial price increase in China," analyst Fai Lee said in a note to clients.
JP Morgan analyst David Silver said he now expects potash producers to negotiate a price hike of $200 to $250 per tonne to China from his 2007 estimated price of $260 per tonne -- up from his earlier estimate of a $150-$200 per tonne increase.
"North American potash stocks remain near record lows, and major suppliers are essentially sold out," Silver said in a research note.
Food inflation pressures could force China to settle its contract next month, said a fertilizer analyst who declined to be named, although the country has enough inventory to wait until May or June for a new deal.
The fertilizer analyst expected China would continue to get a discount to world prices because producers don't want to risk losing a buyer with 10 million tonnes of annual consumption.
"To think that Brazil, India and southeast Asia ... could easily take that up for the next five years is wishful thinking," he said.
But a steep discount for China would cap miners' ability to eke out further price increases from other buyers, he noted
Commodities Aren't Done Yet
If you believe the headlines, the long run in commodities prices ended last week. But retirees shouldn't start celebrating just yet. Before you begin scaling back your inflation expectations and make changes to your retirement portfolio, get some longer-term perspective -- and see how small last week's correction looks compared to price gains in recent years.
Many retirement investors have looked for a way to diversify their portfolios to protect themselves from inflation. The rise in the popularity of commodities has led to a number of new investment vehicles, such as exchange-traded funds tied to the price of oil, gold, and other materials. Given how volatile the commodities markets can be, however, those who've profited from gains may be the first to head to the exits when the music stops.
No shortage of dramaThe reversal in commodities came shortly after two of the most popular ones -- oil and gold -- achieved new highs with true psychological importance. Late last month, oil held the $100 level, and climbed above $110 per barrel until last week's slide brought prices back down to the century mark. Meanwhile, gold broke $1,000 per ounce briefly, trading as high as $1,030 before a dramatic two-day drop that knocked $80 off its price.
As you'd expect, panic gripped investors in stocks that have performed well during the commodities boom. Farm services companies immediately felt the hurt, with seed-producer Monsanto (NYSE: MON) dropping 12% and fertilizer-maker Potash (NYSE: POT) falling 10% last Wednesday. On the mining side, losses were even more severe, as Newmont Mining (NYSE: NEM) took a 14% hit for the week, while North American Palladium (AMEX: PAL) fell 26% as the entire platinum-group was looking far from precious.
What a difference a week makesWhat was more surprising than these big price moves, however, was the quick change in Wall Street sentiment toward commodities. After years of gains, many market professionals started pointing to the correction as the definitive end to the bull market in commodities. Consumers, who've suffered greatly from rising food and fuel prices, couldn't have asked for better news in the face of financial concerns and a possible recession. And companies like Kraft Foods (NYSE: KFT), for whom higher grain and dairy prices mean lower profit margins, reacted positively as well.
Yet for those who found short-term relief in seeing last week's big correction, a longer-term perspective should restore a healthy skepticism about whether commodities prices are starting a lasting downtrend. Gold is still up almost 10% since the beginning of the year and has risen more than $200 per ounce just since last September. Although a $10 drop in oil is a good remedy for pump pain, oil prices are still tenaciously hanging onto triple-digit levels and are up more than 40% since last summer.
Volatility is everywhereThe move in commodities is just another example of how risk is returning to the risk-reward equation for investors. After years of easy, painless gains, markets of all types are reminding everyone that what goes up occasionally goes down.
Just because markets suffer a one-week hiccup, however, doesn't mean that it's time to dump everything and get out. If you've made big profits from investments in companies like Rio Tinto (NYSE: RTP) or ExxonMobil (NYSE: XOM), you may want to trim back your positions -- especially if they've grown to be disproportionately large in your portfolio.
In general, though, having part of your portfolio tied to the fortunes of commodities markets can be a useful way to hedge against inflation risks in retirement. With the world's appetite for raw materials continuing to expand, don't be surprised to see commodities hit new highs again in the near future.
Many retirement investors have looked for a way to diversify their portfolios to protect themselves from inflation. The rise in the popularity of commodities has led to a number of new investment vehicles, such as exchange-traded funds tied to the price of oil, gold, and other materials. Given how volatile the commodities markets can be, however, those who've profited from gains may be the first to head to the exits when the music stops.
No shortage of dramaThe reversal in commodities came shortly after two of the most popular ones -- oil and gold -- achieved new highs with true psychological importance. Late last month, oil held the $100 level, and climbed above $110 per barrel until last week's slide brought prices back down to the century mark. Meanwhile, gold broke $1,000 per ounce briefly, trading as high as $1,030 before a dramatic two-day drop that knocked $80 off its price.
As you'd expect, panic gripped investors in stocks that have performed well during the commodities boom. Farm services companies immediately felt the hurt, with seed-producer Monsanto (NYSE: MON) dropping 12% and fertilizer-maker Potash (NYSE: POT) falling 10% last Wednesday. On the mining side, losses were even more severe, as Newmont Mining (NYSE: NEM) took a 14% hit for the week, while North American Palladium (AMEX: PAL) fell 26% as the entire platinum-group was looking far from precious.
What a difference a week makesWhat was more surprising than these big price moves, however, was the quick change in Wall Street sentiment toward commodities. After years of gains, many market professionals started pointing to the correction as the definitive end to the bull market in commodities. Consumers, who've suffered greatly from rising food and fuel prices, couldn't have asked for better news in the face of financial concerns and a possible recession. And companies like Kraft Foods (NYSE: KFT), for whom higher grain and dairy prices mean lower profit margins, reacted positively as well.
Yet for those who found short-term relief in seeing last week's big correction, a longer-term perspective should restore a healthy skepticism about whether commodities prices are starting a lasting downtrend. Gold is still up almost 10% since the beginning of the year and has risen more than $200 per ounce just since last September. Although a $10 drop in oil is a good remedy for pump pain, oil prices are still tenaciously hanging onto triple-digit levels and are up more than 40% since last summer.
Volatility is everywhereThe move in commodities is just another example of how risk is returning to the risk-reward equation for investors. After years of easy, painless gains, markets of all types are reminding everyone that what goes up occasionally goes down.
Just because markets suffer a one-week hiccup, however, doesn't mean that it's time to dump everything and get out. If you've made big profits from investments in companies like Rio Tinto (NYSE: RTP) or ExxonMobil (NYSE: XOM), you may want to trim back your positions -- especially if they've grown to be disproportionately large in your portfolio.
In general, though, having part of your portfolio tied to the fortunes of commodities markets can be a useful way to hedge against inflation risks in retirement. With the world's appetite for raw materials continuing to expand, don't be surprised to see commodities hit new highs again in the near future.
Investors push farmland prices higher: report
CHICAGO (Reuters) - The slump in residential real-estate prices may have pushed speculators out of the housing market and into farmland, lured by the growing biofuels market, a report said on Monday.
Speculators are helping to drive the price of farmland higher, optimistic that the push to commercialize biofuels has fundamentally altered the rural landscape and created a safe haven from the woes plaguing the U.S. economy.
"The sub-prime mortgage meltdown is causing some investors to look at buying tangible assets, i.e. farmland," according to the survey of professional farm managers and rural appraisers conducted by the University of Illinois.
In Illinois, which ranks second nationally in the export of agricultural commodities, farmland prices have risen between 6 to 17 percent over the past 12 months, the report said.
Illinois and neighboring Iowa, where average farmland values have increased by over 70 percent over the past five years, according to a separate report from Iowa State University, produce one-third of U.S. corn and soybeans -- both critical building blocks in the production of ethanol and biodiesel.
The price of corn and soybeans hit record highs this year as oil has risen above $100 a barrel and the push for renewable forms of alternative fuels has gained traction. As farm incomes have risen, farmers have invested in their businesses by snapping up arable land and buying new tractors and combines.
But while farmers are playing a big role in driving land prices higher, so too are big city speculators, says Bob Swires, the general chairman of the 2008 Illinois Land Values Survey and Conference, where the report was released.
"Investors are seeing agriculture as a producer of energy, not food and that is making investment in land very attractive," Swires said.
U.S. Agriculture Department data shows the average value of U.S. crop land hit a record $2,700 per acre in 2007, up from $1,340 per acre in 1998. Illinois farmland averaged about $4,460 per acre in 2007, the USDA data showed.
Although the report says there has been "a sharp drop in demand" from residential builders in so-called collar counties around big cities like Chicago and St. Louis, prices are still up even there with some buyers willing to fork out as much as $8,000 an acre for the most productive land.
Speculators are helping to drive the price of farmland higher, optimistic that the push to commercialize biofuels has fundamentally altered the rural landscape and created a safe haven from the woes plaguing the U.S. economy.
"The sub-prime mortgage meltdown is causing some investors to look at buying tangible assets, i.e. farmland," according to the survey of professional farm managers and rural appraisers conducted by the University of Illinois.
In Illinois, which ranks second nationally in the export of agricultural commodities, farmland prices have risen between 6 to 17 percent over the past 12 months, the report said.
Illinois and neighboring Iowa, where average farmland values have increased by over 70 percent over the past five years, according to a separate report from Iowa State University, produce one-third of U.S. corn and soybeans -- both critical building blocks in the production of ethanol and biodiesel.
The price of corn and soybeans hit record highs this year as oil has risen above $100 a barrel and the push for renewable forms of alternative fuels has gained traction. As farm incomes have risen, farmers have invested in their businesses by snapping up arable land and buying new tractors and combines.
But while farmers are playing a big role in driving land prices higher, so too are big city speculators, says Bob Swires, the general chairman of the 2008 Illinois Land Values Survey and Conference, where the report was released.
"Investors are seeing agriculture as a producer of energy, not food and that is making investment in land very attractive," Swires said.
U.S. Agriculture Department data shows the average value of U.S. crop land hit a record $2,700 per acre in 2007, up from $1,340 per acre in 1998. Illinois farmland averaged about $4,460 per acre in 2007, the USDA data showed.
Although the report says there has been "a sharp drop in demand" from residential builders in so-called collar counties around big cities like Chicago and St. Louis, prices are still up even there with some buyers willing to fork out as much as $8,000 an acre for the most productive land.
Monsanto Upgraded
Monsanto Gains As Analyst Upgrades on Dip in Stock Price
NEW YORK (AP) -- Shares of Monsanto Co. jumped in early Monday morning trading, after a UBS analyst upgraded the seed maker to "Buy" and said a pullback in the stock price has made shares a better value.
"We still see the lower corn acres impacting profits in Monsanto's seed business, but now see the risk of any weakness priced into the shares," Shaw wrote in a client note.
Shaw upgraded the stock to "Buy" from "Neutral," and said there's still a good long-term opportunity for Monsanto's seed business, given a robust research and development pipeline
NEW YORK (AP) -- Shares of Monsanto Co. jumped in early Monday morning trading, after a UBS analyst upgraded the seed maker to "Buy" and said a pullback in the stock price has made shares a better value.
"We still see the lower corn acres impacting profits in Monsanto's seed business, but now see the risk of any weakness priced into the shares," Shaw wrote in a client note.
Shaw upgraded the stock to "Buy" from "Neutral," and said there's still a good long-term opportunity for Monsanto's seed business, given a robust research and development pipeline
Glance: Agricultural Chemicals
Agricultural Chemical Companies Gain on Upgrades of Monsanto and Potash Corp. of Saskatchewan
NEW YORK (AP) -- Shares of agricultural chemical companies rose in Monday morning trading, lifted by upgrades of Monsanto Co. and Potash Corp. of Saskatchewan Inc.
UBS analyst Chris L. Shaw upgraded seed maker Monsanto to "Buy" from "Neutral" and said a pullback in the stock price has made shares a better value.
Meanwhile, RBC Capital Markets analyst Fai Lee upgraded Potash to "Top Pick" from "Outperform," expecting the potash producer to see gains from higher prices for potash, which is used as a fertilizer for crops.
Here's how some agricultural chemical companies fared on Monday.
Monsanto rose $4.29, or 4.5 percent, to $101.44.
DuPont Co. rose 36 cents to $45.81.
Dow Chemical Co. rose 6 cents to $36.55.
Potash rose $5.35, or 3.9 percent, to $149.85.
Mosaic Co. advanced $3.46, or 4 percent, to $95.52.
NEW YORK (AP) -- Shares of agricultural chemical companies rose in Monday morning trading, lifted by upgrades of Monsanto Co. and Potash Corp. of Saskatchewan Inc.
UBS analyst Chris L. Shaw upgraded seed maker Monsanto to "Buy" from "Neutral" and said a pullback in the stock price has made shares a better value.
Meanwhile, RBC Capital Markets analyst Fai Lee upgraded Potash to "Top Pick" from "Outperform," expecting the potash producer to see gains from higher prices for potash, which is used as a fertilizer for crops.
Here's how some agricultural chemical companies fared on Monday.
Monsanto rose $4.29, or 4.5 percent, to $101.44.
DuPont Co. rose 36 cents to $45.81.
Dow Chemical Co. rose 6 cents to $36.55.
Potash rose $5.35, or 3.9 percent, to $149.85.
Mosaic Co. advanced $3.46, or 4 percent, to $95.52.
Thursday, March 20, 2008
Sector Snap: Agricultural Chemicals
Agricultural Chemicals Decline on Lower Commodities Prices, Analyst Says
NEW YORK (AP) -- Shares of agricultural chemical companies declined on Thursday, following commodities prices mostly lower.
Banc of America Securities analyst Kevin W. McCarthy said agricultural chemical companies have declined recently on a sell-off in commodities like gold, oil, corn and soy.
"Investors sold on the belief that Fed cuts are nearly done, which could support the dollar, with negative implications for dollar-denominated commodities," McCarthy wrote in a client note.
The Federal Reserve on Tuesday lowered interest rates for the sixth time since September.
Monsanto Co., which offers crop protection products and seed traits that protect against bugs and weeds, declined $3.85, or 3.9 percent, to $94.99 in afternoon trading.
Elsewhere, DuPont Co. declined 42 cents to $45.05.
McCarthy, in a client note, said DuPont's earnings per share growth outlook of 7 percent to 9 percent is "ambitious," given the expirations of numerous patents.
On the positive side, McCarthy said DuPont should gain from demand from emerging markets.
In 2007, 61 percent of DuPont's sales came from outside the U.S., and 25 percent of sales were attributed to emerging markets, like Latin America.
Dow Chemical Co. declined 32 cents to $36.09, and Syngenta AG, which is based in Switzerland, lost $1.92, or 3.5 percent, to $52.91. Both companies make crop protection products.
Meanwhile, fertilizer companies Potash Corp. and Mosaic Co. also declined. Canada's Potash lost $2.60 to $141.88, and Mosaic, which makes potash products, shed $7.10, or 7.3 percent, to $90.10. Potash is a fertilizer made from wood ashes used mostly in agriculture to fertilize crops and other plants.
NEW YORK (AP) -- Shares of agricultural chemical companies declined on Thursday, following commodities prices mostly lower.
Banc of America Securities analyst Kevin W. McCarthy said agricultural chemical companies have declined recently on a sell-off in commodities like gold, oil, corn and soy.
"Investors sold on the belief that Fed cuts are nearly done, which could support the dollar, with negative implications for dollar-denominated commodities," McCarthy wrote in a client note.
The Federal Reserve on Tuesday lowered interest rates for the sixth time since September.
Monsanto Co., which offers crop protection products and seed traits that protect against bugs and weeds, declined $3.85, or 3.9 percent, to $94.99 in afternoon trading.
Elsewhere, DuPont Co. declined 42 cents to $45.05.
McCarthy, in a client note, said DuPont's earnings per share growth outlook of 7 percent to 9 percent is "ambitious," given the expirations of numerous patents.
On the positive side, McCarthy said DuPont should gain from demand from emerging markets.
In 2007, 61 percent of DuPont's sales came from outside the U.S., and 25 percent of sales were attributed to emerging markets, like Latin America.
Dow Chemical Co. declined 32 cents to $36.09, and Syngenta AG, which is based in Switzerland, lost $1.92, or 3.5 percent, to $52.91. Both companies make crop protection products.
Meanwhile, fertilizer companies Potash Corp. and Mosaic Co. also declined. Canada's Potash lost $2.60 to $141.88, and Mosaic, which makes potash products, shed $7.10, or 7.3 percent, to $90.10. Potash is a fertilizer made from wood ashes used mostly in agriculture to fertilize crops and other plants.
Why AG sector is down ?
Is it because of the Barron's article " 'Fertilizers Stocks Could Start to Wilt ? "
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Monday, March 17, 2008
Top Rocket Stocks for Week of March 17
Since the start of the Rocket Stocks weekly column, I've been putting together a list of 10 stocks each week that I believe have the potential to move higher in the coming week.
With the market's recent volatility, the best way to trade lately is finding beaten-down stocks that have both short-term growth potential and strong fundamentals.
With such volatile stocks, all you really need is a small ounce of hope for the shorts to start panicking and the momentum drivers to start piling in, driving up share price.
Back testing on the Nasdaq 100 shows that a stock that drops 10% in a day will on average be 2% higher one week later. Conversely, if a stock is up 10% in a day, it is usually down one week later.
Before we take a look at this week's Rocket Stocks portfolio -- which includes names like Goldman Sachs (GS - Cramer's Take - Stockpickr), Tesoro (TSO - Cramer's Take - Stockpickr) and Southern Union (SUG - Cramer's Take - Stockpickr), let's see how the last week's picks fared.
Zoltek (ZOLT - Cramer's Take - Stockpickr): Up 4.6% on the week.
Potash (POT - Cramer's Take - Stockpickr): Up 4.4% on the week.
MercadoLibre (MELI - Cramer's Take - Stockpickr): Up 3.7% on the week.
LMI Aerospace (LMIA - Cramer's Take - Stockpickr): Up 3.2% for the week.
Dick's Sporting Goods (DKS - Cramer's Take - Stockpickr): Up 2.7% on the week.
National Oilwell Varco (NOV - Cramer's Take - Stockpickr): Up 0.3% on the week.
Sasol (SSL - Cramer's Take - Stockpickr): Down 1.5% for the week.
Companhia Energetica de Minas Gerais (CIG - Cramer's Take - Stockpickr): Down 4.8% on the week.
Holly Corp (HOC - Cramer's Take - Stockpickr): Down 7.1% on the week.
Chimera Investment (CIM - Cramer's Take - Stockpickr): Down 7.2% for the week.
Now let's look this week's Rocket Stocks portfolio.
First up this week is Aluminum Corp of China (ACH - Cramer's Take - Stockpickr), which has a forward price-to-earnings (P/E) ratio of 8.8 and a P/E-to-growth (PEG) ratio of 1.1.
Down $50 from its all-time high of about $90 a share hit back in October, Aluminum China has been oversold, and thus I am looking for a snapback rally into this week's preliminary earnings report.
Aluminum China operates in two bull markets: China and aluminum, and although it represents a much riskier than, say, Aloca (AA - Cramer's Take - Stockpickr), Aluminum China has the potential to ramp more than 10 points in a single day.
Companies like Kaiser Aluminum (KALU - Cramer's Take - Stockpickr), Century Aluminum (CENX - Cramer's Take - Stockpickr) and Alcoa all handily beat their latest earnings estimates, which could help Aluminum China's chances to deliver an upside surprise.
Also worth keeping an eye on is small-cap biotech company Enzon Pharmaceuticals ENZN. Carl Icahn, who holds a 6.93% stake in the company, has reportedly suggested to management that they "consider possible alternative strategies," which basically means that the activist investor believes Enzon is substantially undervalued.
Icahn stated his plans Friday midafternoon, during the height of the Bear Stearns BSC mess. Overlooked by Wall Street, Enzon Pharma has the potential to move much higher in the coming week.
And with a third of its float sold short, Enzon has a short ratio of nearly 21. So on any positive news, the stock could really surge.
For more detailed analysis and the rest of this week's picks, check out the please click here.
For the rest of this week's picks and more detailed analysis, check out the Rocket Stocks for the Week of March 17-21 at Stockpickr.com.
As always, to find the snapbacks and potential breakouts on a regular basis, check out these Stockpickr portfolios, which I use in my own research each week:
Today's Hot List: This daily list is a must-view every midday to see what stocks are making the biggest moves and why.
Always check the Biggest Percentage Losers, a list of stocks that lost big the day before, because they can snap back hard.
When you check this list on Stockpickr, you can see which stocks are owned by the quality hedge funds and mutual funds. Pay attention to those. They will be buying at the lower prices, so you should be also.
Ditto for the 52-week-low list. You must check the above two lists every day if you hope to find volatile stocks.
Biotech Short Squeezes: DendreonDNDN and others can often be found in this category.
Stocks Rising on Unusual Volume: These are potential breakout stocks.
Stockpickr's System Trades of the Day: These are trades triggering that day in various back tested trading systems we've developed.
Stocks With Unusual Option Activity: Perhaps someone knows something?
Latest Activist Situations: These are beaten-down stocks that hedge funds are accumulating shares of and demanding change in. Believe me, these hedge funds piggyback each other. And once they start rocking the boat, things happen quickly. This should be on your must-view list.
One final place to frequent is the Answers section on Stockpickr, where ideas such as those presented in this article are thrown around daily.
With the market's recent volatility, the best way to trade lately is finding beaten-down stocks that have both short-term growth potential and strong fundamentals.
With such volatile stocks, all you really need is a small ounce of hope for the shorts to start panicking and the momentum drivers to start piling in, driving up share price.
Back testing on the Nasdaq 100 shows that a stock that drops 10% in a day will on average be 2% higher one week later. Conversely, if a stock is up 10% in a day, it is usually down one week later.
Before we take a look at this week's Rocket Stocks portfolio -- which includes names like Goldman Sachs (GS - Cramer's Take - Stockpickr), Tesoro (TSO - Cramer's Take - Stockpickr) and Southern Union (SUG - Cramer's Take - Stockpickr), let's see how the last week's picks fared.
Zoltek (ZOLT - Cramer's Take - Stockpickr): Up 4.6% on the week.
Potash (POT - Cramer's Take - Stockpickr): Up 4.4% on the week.
MercadoLibre (MELI - Cramer's Take - Stockpickr): Up 3.7% on the week.
LMI Aerospace (LMIA - Cramer's Take - Stockpickr): Up 3.2% for the week.
Dick's Sporting Goods (DKS - Cramer's Take - Stockpickr): Up 2.7% on the week.
National Oilwell Varco (NOV - Cramer's Take - Stockpickr): Up 0.3% on the week.
Sasol (SSL - Cramer's Take - Stockpickr): Down 1.5% for the week.
Companhia Energetica de Minas Gerais (CIG - Cramer's Take - Stockpickr): Down 4.8% on the week.
Holly Corp (HOC - Cramer's Take - Stockpickr): Down 7.1% on the week.
Chimera Investment (CIM - Cramer's Take - Stockpickr): Down 7.2% for the week.
Now let's look this week's Rocket Stocks portfolio.
First up this week is Aluminum Corp of China (ACH - Cramer's Take - Stockpickr), which has a forward price-to-earnings (P/E) ratio of 8.8 and a P/E-to-growth (PEG) ratio of 1.1.
Down $50 from its all-time high of about $90 a share hit back in October, Aluminum China has been oversold, and thus I am looking for a snapback rally into this week's preliminary earnings report.
Aluminum China operates in two bull markets: China and aluminum, and although it represents a much riskier than, say, Aloca (AA - Cramer's Take - Stockpickr), Aluminum China has the potential to ramp more than 10 points in a single day.
Companies like Kaiser Aluminum (KALU - Cramer's Take - Stockpickr), Century Aluminum (CENX - Cramer's Take - Stockpickr) and Alcoa all handily beat their latest earnings estimates, which could help Aluminum China's chances to deliver an upside surprise.
Also worth keeping an eye on is small-cap biotech company Enzon Pharmaceuticals ENZN. Carl Icahn, who holds a 6.93% stake in the company, has reportedly suggested to management that they "consider possible alternative strategies," which basically means that the activist investor believes Enzon is substantially undervalued.
Icahn stated his plans Friday midafternoon, during the height of the Bear Stearns BSC mess. Overlooked by Wall Street, Enzon Pharma has the potential to move much higher in the coming week.
And with a third of its float sold short, Enzon has a short ratio of nearly 21. So on any positive news, the stock could really surge.
For more detailed analysis and the rest of this week's picks, check out the please click here.
For the rest of this week's picks and more detailed analysis, check out the Rocket Stocks for the Week of March 17-21 at Stockpickr.com.
As always, to find the snapbacks and potential breakouts on a regular basis, check out these Stockpickr portfolios, which I use in my own research each week:
Today's Hot List: This daily list is a must-view every midday to see what stocks are making the biggest moves and why.
Always check the Biggest Percentage Losers, a list of stocks that lost big the day before, because they can snap back hard.
When you check this list on Stockpickr, you can see which stocks are owned by the quality hedge funds and mutual funds. Pay attention to those. They will be buying at the lower prices, so you should be also.
Ditto for the 52-week-low list. You must check the above two lists every day if you hope to find volatile stocks.
Biotech Short Squeezes: DendreonDNDN and others can often be found in this category.
Stocks Rising on Unusual Volume: These are potential breakout stocks.
Stockpickr's System Trades of the Day: These are trades triggering that day in various back tested trading systems we've developed.
Stocks With Unusual Option Activity: Perhaps someone knows something?
Latest Activist Situations: These are beaten-down stocks that hedge funds are accumulating shares of and demanding change in. Believe me, these hedge funds piggyback each other. And once they start rocking the boat, things happen quickly. This should be on your must-view list.
One final place to frequent is the Answers section on Stockpickr, where ideas such as those presented in this article are thrown around daily.
Thursday, March 13, 2008
Market Acting Like a Bear, Even Though It's Not
When it comes to figuring out this stock market, the bear is in the eye of the beholder.
As things stand, only the Nasdaq has entered what is technically considered a bear market: a 20 percent drop from the most-recent high.
The Dow Jones Industrial Average and the Standard & Poor's 500 are still short of that mark, though they might as well be in a bear market, analysts believe. Market sentiment is so low that traders are behaving as if stocks had been in a bear market for months.
"If I were to describe the environment as it is now it's certainly a bear market environment," said Todd Salamone, director of trading at Schaeffer's Investment Research. "As far as how long it persists, I think the jury's still out there."
In addition to numerical benchmarks, bear markets are distinguished by their psychology. Investors develop an overriding sense of pessimism that the market is unlikely to recover soon, and their behavior is reflected in what they do with their money.
In this particlar bear run, investors have tended to sell into rallies and buy on the declines. Rallies have been short-lived, consistent with the notion that rallies in a bear market are brief and falter when volume is low.
High volume is seen as showing confidence in the market, and most of the trading days for the past several months have been marked by the comparatively low amount of shares trading hands.
"As far as sentiment is concerned it definitely has all the earmarks of a bear market," said Quincy Krosby,chief investment strategist at The Hartford. "Certainly the temperament of the market is you don't see the follow-though that you'd like. The sentiment certainly seems to be negative."
Before pulling out of bear territory, investors generally need to see undeniable signs of a bottom--something that hasn't happened yet despite the howls of pain emanating from Wall Street.
Analysts hearken back to the market-bottoming of October 2002 for the template on what needs to happen to cure the 2008 version. At that point the market saw a huge selloff, particularly in mutual funds, and the Volatility Index (Chicago: VIX) hit unprecedented levels.
In this market, after regaining the highs of last October several times, stocks tested their lows but never went below them.
The word "capitulation" comes to mind--where panicky investors just sell everything--though it's a word money managers try to avoid.
"Many veterans would like to see a kind of major selling that is commensurate with a major spike in the Vix, and we haven't gotten there yet," Krosby said. "They feel it really hasn't gotten negative enough to spark the kind of selling that they would equate with a market bottom."
While the selling may not have been quite as dramatic, it has been steep.
The Nasdaq (NASDAQ: .NCOMP) has crossed the path of the bear, with a 22 percent decline off its high. The S&P (Chicago: .SPX) has tumbled nearly 18 percent, while the Dow (Dow: .DJIA) is off nearly 16 percent.
Salamone, though, said the S&P in particular has broken an 80-week trend line, indicating to him that the bears are in control. He sees the S&P needing to test the 1,250 area before a bottom can be established.
As for navigating out of the bear market, Salamone advises a three-pronged strategy: Using put options to limit risk; moving into cash; or to find sectors bucking the larger trends.
A put allows, but does not require, an investor to buy an option from a put writer, or seller, at a specific time for a specific price. Cash moves, meanwhile, provide security but are short on returns these days, with yields on Treasurys their lowest in years and CDs tumbling over the past year as well.
Salamone recommends commodity-focused ETFs including Street Tracks Gold Shares (NYSE Arca: GLD), which mimics gold prices, and Market Vectors Global Agribusiness (AMEX:MOO - News), which follows agricultural commodities.
As for Krosby, the formula is more traditional.
"This is the reason we always stress diversification," she said, "simply because there will always be something that moves up when the other parts of the market are down."
Analyst Upgrades Monsanto on Strength of Pipeline Products
NEW YORK (AP) -- A Banc of America Securities analyst upgraded Monsanto Co. on Thursday, citing a pullback in share price and expected growth in sales of genetically modified crops and seeds.
Analyst Kevin McCarthy raised his rating to "Buy" from "Neutral," saying a recent slide in the stock price has made shares a better value. He is now less concerned about Monsanto's competition, and thinks the company has several promising products in its pipeline
The analyst said crop prices are rising, and farmers are devoting more space to genetically modified seeds because they can increase crop yields. That is driving greater use of Monsanto's RoundupReady seeds, and should lead to use of developing products like RoundupReady2 soybeans and drought-tolerant corn.
He said that could lead to earnings per share growth of 20 percent or more over the next five years.
The stock reached an all-time high of $129.28 on Jan. 15, and is down 18 percent since that time. McCarthy expects shares to rise to $130 over the next year. His previous price target was $116.
Analyst Kevin McCarthy raised his rating to "Buy" from "Neutral," saying a recent slide in the stock price has made shares a better value. He is now less concerned about Monsanto's competition, and thinks the company has several promising products in its pipeline
The analyst said crop prices are rising, and farmers are devoting more space to genetically modified seeds because they can increase crop yields. That is driving greater use of Monsanto's RoundupReady seeds, and should lead to use of developing products like RoundupReady2 soybeans and drought-tolerant corn.
He said that could lead to earnings per share growth of 20 percent or more over the next five years.
The stock reached an all-time high of $129.28 on Jan. 15, and is down 18 percent since that time. McCarthy expects shares to rise to $130 over the next year. His previous price target was $116.
Wednesday, March 12, 2008
Fast Money Pops and Drops:
Pops
Thornburg Mortgage TMA rocketed up 119%. Tim Seymour said the stock is nevertheless down 93% on the year. The Fed move doesn't help Thornburg, he said.
U.S. Steel X jumped 8%. Guy Adami said that if a company has pricing power in this environment, it has everything. The steel names have that power, he said.
Vornado VNO climbed 9%. Karen Finerman said it was a very nice move. With the stock down to $85 from $117 a few months ago, it needed a pop. It seems fair, she said.
Inter Parfums IPAR rose 21%. Finerman said it smells nice when you guide profit higher than expectations.
India Fund IFN ticked up 16%. Seymour said a the move was mostly short covering.
Potash POT added 9%. Adami said that you have to buy this stock on dips.
JA Solar JASO popped 18%. Pete Najarian said that ahead of earnings tomorrow several analysts issued bullish reports on the company.
North American Palladium PAL was up 10%. Seymour said he loves palladium names. He cautioned that many precious metal companies are locked into long-term contracts, so spot prices don't help.
You Ask, Cramer Answers
I was thinking about dipping into Deere (DE). I feel it's the best and safest way to get into the agriculture boom. Hypothetically, if Congress wakes up and realizes that ethanol is nonsense and takes off all its ethanol legislation, does this pretty much turn Deere and the rest of the ag complex into toxic stocks?
Cramer's answer - dip on a scale, real bad market
Cramer's answer - dip on a scale, real bad market
Monday, March 10, 2008
Do DuPont As Agriculture Soars
I was fortunate enough to hear John Mellencamp perform at a very small venue a number of years ago. Tonight Billy Joel will present John Mellencamp for induction into the Rock and Roll Hall of Fame at the Waldorf Astoria. Rain On The Scarecrow was released in 1985, and things weren’t great for the small farmer at the time.
Oh my, how things have changed. Without question one of the great secular growth stories over the last 18 months has been agriculture. For illustration, we need only look at the explosive stock moves in companies like Deere & Co. (DE), up about 155%, Monsanto (MON), up about 145% since August of 2006, and Potash (POT), up about 400% over the same period of time.
Although on a valuation basis I can still make a compelling argument for each of these stocks, the parabolic moves higher may be enough to scare off grizzled veterans. But if we accept the fact that the agriculture story is still very much alive, what’s the trade?
E.I. du Pont de Nemours & Company (DD), from here on referred to simply as DuPont, is worth a look. According to the company’s website, "In 1802, DuPont was primarily an explosives company. One hundred years ago their focus turned to chemicals, materials and energy." These days, when many people think of DuPont, they think of Corian and Kevlar. But there’s been something of a seismic shift at the company.
On February 20th, DuPont reaffirmed its outlook for first quarter and fiscal 2008. The company went on to say its "agriculture and nutrition segment is on track to deliver double-digit earnings growth in 2008 by increasing North American corn trait penetration to 90% from 75% in 2007." But it’s not just about corn. DuPont enjoys strong positions in animal health solutions, crop protection, seeds and inoculants and vegetation management. To that end, more than 20% of their revenues are now derived either directly or indirectly from agriculture.
At 14.00 times trailing and 12.50 times forward earnings, DuPont is much cheaper than the pure agriculture plays of Potash, which currently trades around 46 times trailing and 19 times forward earnings, and Monsanto, which trades at 51 times trailing and 30.50 times forward earnings.
I bring the distinction to light because I still believe we’re early in the cycle of DuPont's growth in the agriculture space. Although it will never enjoy the hefty multiple awarded to leaders like Potash and Monsanto, there’s still tremendous room for multiple expansion.
Obviously, entry points are everything, and more so in the current environment. Since trading as low as $42.50 in mid- to late January, DuPont has seen a nice bounce of close to 10%. The $47.50 level on the upside has proved to be resistance as recently as February 27th and December 10th before that. I think we could potentially see DuPont trade back down to $44.50 or so, and I think that would provide a fantastic entry point. For those who are a bit more aggressive, starting to build a position at current levels may be a reasonable idea.
On March 4th, DuPont was initiated at outperform (along with Monsanto, interestingly enough) at Credit Suisse with a price target of $57. I don’t think we go straight up from here, but a close above $48 may signal a breakout. It’s also important to mention that DuPont pays a tidy dividend of 3.5%.
I love the way their product mix has changed with the times over the years. It’s my contention that DuPont provides us with a great -- and relatively cheap -- way to play the still-robust agriculture industry.
Oh my, how things have changed. Without question one of the great secular growth stories over the last 18 months has been agriculture. For illustration, we need only look at the explosive stock moves in companies like Deere & Co. (DE), up about 155%, Monsanto (MON), up about 145% since August of 2006, and Potash (POT), up about 400% over the same period of time.
Although on a valuation basis I can still make a compelling argument for each of these stocks, the parabolic moves higher may be enough to scare off grizzled veterans. But if we accept the fact that the agriculture story is still very much alive, what’s the trade?
E.I. du Pont de Nemours & Company (DD), from here on referred to simply as DuPont, is worth a look. According to the company’s website, "In 1802, DuPont was primarily an explosives company. One hundred years ago their focus turned to chemicals, materials and energy." These days, when many people think of DuPont, they think of Corian and Kevlar. But there’s been something of a seismic shift at the company.
On February 20th, DuPont reaffirmed its outlook for first quarter and fiscal 2008. The company went on to say its "agriculture and nutrition segment is on track to deliver double-digit earnings growth in 2008 by increasing North American corn trait penetration to 90% from 75% in 2007." But it’s not just about corn. DuPont enjoys strong positions in animal health solutions, crop protection, seeds and inoculants and vegetation management. To that end, more than 20% of their revenues are now derived either directly or indirectly from agriculture.
At 14.00 times trailing and 12.50 times forward earnings, DuPont is much cheaper than the pure agriculture plays of Potash, which currently trades around 46 times trailing and 19 times forward earnings, and Monsanto, which trades at 51 times trailing and 30.50 times forward earnings.
I bring the distinction to light because I still believe we’re early in the cycle of DuPont's growth in the agriculture space. Although it will never enjoy the hefty multiple awarded to leaders like Potash and Monsanto, there’s still tremendous room for multiple expansion.
Obviously, entry points are everything, and more so in the current environment. Since trading as low as $42.50 in mid- to late January, DuPont has seen a nice bounce of close to 10%. The $47.50 level on the upside has proved to be resistance as recently as February 27th and December 10th before that. I think we could potentially see DuPont trade back down to $44.50 or so, and I think that would provide a fantastic entry point. For those who are a bit more aggressive, starting to build a position at current levels may be a reasonable idea.
On March 4th, DuPont was initiated at outperform (along with Monsanto, interestingly enough) at Credit Suisse with a price target of $57. I don’t think we go straight up from here, but a close above $48 may signal a breakout. It’s also important to mention that DuPont pays a tidy dividend of 3.5%.
I love the way their product mix has changed with the times over the years. It’s my contention that DuPont provides us with a great -- and relatively cheap -- way to play the still-robust agriculture industry.
You Ask, Cramer Answers
Is there any bad news on DE today, or is this just profit taking?
to me profit taking.. commodities down .. i like it - Jim Cramer
to me profit taking.. commodities down .. i like it - Jim Cramer
Sunday, March 9, 2008
Upside for Monsanto May Be Genetic
INTEREST IN AGRICULTURAL STOCKS is red hot, yet Monsanto, a leader in the global agricultural industry, is surprisingly attracting less-than-bullish options trading.
The stock's trajectory seems to be leveling off after rising 117% in the past year, and options traders are selling calls and puts in apparent anticipation the stock may now trade in a tighter range.
One investor, probably a hedge-fund manager, recently sold 4,000 July 150 calls, and also 9,000 July 90 puts. Other investors, according to Susquehanna Financial Group, sold Monsanto's April 120 and 125 calls.
The put-and-call trade, which was executed as a package, suggests a big investor thinks Monsanto's stock will not trade above $150 by July, nor will it fall to $90 from its current price of $111. Should the stock decline to $90, the investor would be obligated to buy the stock. Similarly, the investors who sold Monsanto's April 120 and 125 calls -- and it's not known if they own the stock -- probably doesn't think the stock advances to those prices by April expiration.
According to Trade Alert, Monsanto's options-trading sentiment has been primarily bearish. A Trade Alert tool that measures order executions determined that 60% of Monsanto's options trading was bearish, 23% was neutral, and 17% was bullish.
Of course, all the options-trading activity is very opportunistic and very focused on short-term trading patterns. In the long term, Monsanto is well positioned to capitalize on the growing global demand for food. Genetically Modified Organisms (GMOs), of which Monsanto has many, are expected to be increasingly important.
Credit Suisse, which initiated coverage of Monsanto today with a neutral rating and 12-month price target of $131, speculated that emerging markets would more eagerly embrace genetically altered foods than say some Western countries. "Europe may maintain resistance, but emerging markets – with greater urgency to feed rapidly expanding (and demanding) populations – are likely to embrace genetically modified organisms quickly and decisively," the analyst Mark W. Connelly, said in the research note.
In his estimation, Monsanto's leadership in the GMO market seems secure for much of the next decade. He said no seed competitor is poised to mount a "real challenge." His lack of enthusiasm for the stock reflects few opportunities for the stock to advance because all the good news is priced in.
Monsanto's existing investors may be disappointed to see the shares lose some of their upward momentum; the options trading hints at that. For everyone else who believes the agricultural markets and stocks are good long-term investments, Monsanto's current weakness is a buying opportunity.
The stock's trajectory seems to be leveling off after rising 117% in the past year, and options traders are selling calls and puts in apparent anticipation the stock may now trade in a tighter range.
One investor, probably a hedge-fund manager, recently sold 4,000 July 150 calls, and also 9,000 July 90 puts. Other investors, according to Susquehanna Financial Group, sold Monsanto's April 120 and 125 calls.
The put-and-call trade, which was executed as a package, suggests a big investor thinks Monsanto's stock will not trade above $150 by July, nor will it fall to $90 from its current price of $111. Should the stock decline to $90, the investor would be obligated to buy the stock. Similarly, the investors who sold Monsanto's April 120 and 125 calls -- and it's not known if they own the stock -- probably doesn't think the stock advances to those prices by April expiration.
According to Trade Alert, Monsanto's options-trading sentiment has been primarily bearish. A Trade Alert tool that measures order executions determined that 60% of Monsanto's options trading was bearish, 23% was neutral, and 17% was bullish.
Of course, all the options-trading activity is very opportunistic and very focused on short-term trading patterns. In the long term, Monsanto is well positioned to capitalize on the growing global demand for food. Genetically Modified Organisms (GMOs), of which Monsanto has many, are expected to be increasingly important.
Credit Suisse, which initiated coverage of Monsanto today with a neutral rating and 12-month price target of $131, speculated that emerging markets would more eagerly embrace genetically altered foods than say some Western countries. "Europe may maintain resistance, but emerging markets – with greater urgency to feed rapidly expanding (and demanding) populations – are likely to embrace genetically modified organisms quickly and decisively," the analyst Mark W. Connelly, said in the research note.
In his estimation, Monsanto's leadership in the GMO market seems secure for much of the next decade. He said no seed competitor is poised to mount a "real challenge." His lack of enthusiasm for the stock reflects few opportunities for the stock to advance because all the good news is priced in.
Monsanto's existing investors may be disappointed to see the shares lose some of their upward momentum; the options trading hints at that. For everyone else who believes the agricultural markets and stocks are good long-term investments, Monsanto's current weakness is a buying opportunity.
Thursday, March 6, 2008
Fast Money - Portfolios of the Week
Identifying the next big growth market and finding the hot trends can often to be the hardest part of being an investor. The traders from CNBC's "Fast Money" can help investors find these stock market opportunities that many find so hard to discover.
The crew recently highlighted trading ideas that play off of baby boomers migrating to Miami, emerging market growth in Brazil and short ideas for the slowdown in construction spending. Here are some highlights from the past week as aggregated from the show.
Fast Money's Baby-Boomer Stock Picks: Baby boomers are wealthier, healthier and looking for adventure. Miami has become the destination of choice for baby boomers, and the "Fast Money" traders came up with some stocks that could benefit from the boomers' trends. On last Friday's
"Fast Money" show Guy Adami advised viewers, "Look at Zimmer (ZMH - Cramer's Take - Stockpickr) and Stryker (SYK - Cramer's Take - Stockpickr) as boomer plays. But they're not quick trades. These are the kinds of stocks you buy and hold." Fast Money's Baby-Boomer Stock Picks include Ameriprise Financial (AMP - Cramer's Take - Stockpickr) and Raymond James Financial (RJF - Cramer's Take - Stockpickr) among others.
Fast Money's Latin America Stock Picks: Business is booming in Latin America, and the "Fast Money" traders know just how to play it. On last Friday's "Fast Money" show, Tim Seymour told viewers, "As the commodity wealth trickles down, it creates a foundation for an emerging consumer class in the tropics. And those consumers are using credit cards, cell phones and watching satellite TV like never before." Fast Money' Latin America Stock Picks include Companhia Vale do Rio Doce (RIO - Cramer's Take - Stockpickr) and Petroleo Brasileiro (PBR - Cramer's Take - Stockpickr) among others.
Fast Money's High-Oil Stock Picks: With crude oil crossing the $100 level, the "Fast Money" traders introduced some stock ideas to play high oil prices. On last Wednesday's "Fast Money" show, Joe Terranova, director of trading at MBF Clearing, told viewers, "Oil could rally an additional 10% to 15% in the coming months. Currently, oil investors are starting to bid up the long-dated contracts, which suggest to me that oil could stay at the 100-dollar level for some time."
Fast Money's High-Oil Stock Picks include names like XTO Energy (XTO - Cramer's Take - Stockpickr) and Transocean (RIG - Cramer's Take - Stockpickr) among others.
Fast Money's Recession-Proof Food Stocks: The "Fast Money" traders recently identified that consumers are cutting back on casual dining and increasingly eating in. On last Thursday's "Fast Money" show, Jeff Macke told viewers, "Don't believe it? All you need to do is check the results from Hormel (HRL - Cramer's Take - Stockpickr) and Heinz (HNZ - Cramer's Take - Stockpickr). Frozen food, pasta sauces and spam are experiencing a surge in demand. It appears the consumer is eating in." Fast Money's Recession-Proof Food Stocks include Pepsi (PEP - Cramer's Take - Stockpickr) and Campbell Soup (CPB - Cramer's Take - Stockpickr) among others.
Fast Money's Trader Radar: In a "Fast Money" segment called "Trader Radar," the traders highlight stocks with unusual volume that are lighting up screens across Wall Street. On Tuesday's "Fast Money" show, Dylan Ratigan told viewers, "Washington Mutual(WM - Cramer's Take - Stockpickr) is on the 'Fast Money' Trader Radar. This savings bank traded lower on almost twice its average daily volume." Fast Money's Trader Radar includes Ford (F - Cramer's Take - Stockpickr) among others.
Fast Money's Brazil Stock Picks: Brazil has surpassed China to become the world's biggest emerging market. On last Thursday's "Fast Money" show, Tim Seymour told viewers, "It's an export-driven economy, and they have commodities that the world needs. That's what's driving Brazil. If you want to play this country, look at the iShares MSCI Brazil Index ETF (EWZ - Cramer's Take - Stockpickr), homebuilders and cellular companies." Fast Money's Brazil Stock Picks include Cisco (CSCO - Cramer's Take - Stockpickr) and Potash (POT - Cramer's Take - Stockpickr) among others.
Fast Money's Construction Short Trades: Construction spending has fallen by the largest amount in 14 years and manufacturing activity contracted, troubling sings for a already depressed U.S. economy. On Tuesday's "Fast Money" show, Karen Finerman told viewers, "Although they are a conglomerate, they have a pretty big exposure to the construction space with their HVAC, Carrier and Otis elevator businesses. I think you can short United Technologies(UTX - Cramer's Take - Stockpickr)." Check out the Fast Money's Construction Short Trades which also includes Ingersoll-Rand (IR - Cramer's Take - Stockpickr).
The crew recently highlighted trading ideas that play off of baby boomers migrating to Miami, emerging market growth in Brazil and short ideas for the slowdown in construction spending. Here are some highlights from the past week as aggregated from the show.
Fast Money's Baby-Boomer Stock Picks: Baby boomers are wealthier, healthier and looking for adventure. Miami has become the destination of choice for baby boomers, and the "Fast Money" traders came up with some stocks that could benefit from the boomers' trends. On last Friday's
"Fast Money" show Guy Adami advised viewers, "Look at Zimmer (ZMH - Cramer's Take - Stockpickr) and Stryker (SYK - Cramer's Take - Stockpickr) as boomer plays. But they're not quick trades. These are the kinds of stocks you buy and hold." Fast Money's Baby-Boomer Stock Picks include Ameriprise Financial (AMP - Cramer's Take - Stockpickr) and Raymond James Financial (RJF - Cramer's Take - Stockpickr) among others.
Fast Money's Latin America Stock Picks: Business is booming in Latin America, and the "Fast Money" traders know just how to play it. On last Friday's "Fast Money" show, Tim Seymour told viewers, "As the commodity wealth trickles down, it creates a foundation for an emerging consumer class in the tropics. And those consumers are using credit cards, cell phones and watching satellite TV like never before." Fast Money' Latin America Stock Picks include Companhia Vale do Rio Doce (RIO - Cramer's Take - Stockpickr) and Petroleo Brasileiro (PBR - Cramer's Take - Stockpickr) among others.
Fast Money's High-Oil Stock Picks: With crude oil crossing the $100 level, the "Fast Money" traders introduced some stock ideas to play high oil prices. On last Wednesday's "Fast Money" show, Joe Terranova, director of trading at MBF Clearing, told viewers, "Oil could rally an additional 10% to 15% in the coming months. Currently, oil investors are starting to bid up the long-dated contracts, which suggest to me that oil could stay at the 100-dollar level for some time."
Fast Money's High-Oil Stock Picks include names like XTO Energy (XTO - Cramer's Take - Stockpickr) and Transocean (RIG - Cramer's Take - Stockpickr) among others.
Fast Money's Recession-Proof Food Stocks: The "Fast Money" traders recently identified that consumers are cutting back on casual dining and increasingly eating in. On last Thursday's "Fast Money" show, Jeff Macke told viewers, "Don't believe it? All you need to do is check the results from Hormel (HRL - Cramer's Take - Stockpickr) and Heinz (HNZ - Cramer's Take - Stockpickr). Frozen food, pasta sauces and spam are experiencing a surge in demand. It appears the consumer is eating in." Fast Money's Recession-Proof Food Stocks include Pepsi (PEP - Cramer's Take - Stockpickr) and Campbell Soup (CPB - Cramer's Take - Stockpickr) among others.
Fast Money's Trader Radar: In a "Fast Money" segment called "Trader Radar," the traders highlight stocks with unusual volume that are lighting up screens across Wall Street. On Tuesday's "Fast Money" show, Dylan Ratigan told viewers, "Washington Mutual(WM - Cramer's Take - Stockpickr) is on the 'Fast Money' Trader Radar. This savings bank traded lower on almost twice its average daily volume." Fast Money's Trader Radar includes Ford (F - Cramer's Take - Stockpickr) among others.
Fast Money's Brazil Stock Picks: Brazil has surpassed China to become the world's biggest emerging market. On last Thursday's "Fast Money" show, Tim Seymour told viewers, "It's an export-driven economy, and they have commodities that the world needs. That's what's driving Brazil. If you want to play this country, look at the iShares MSCI Brazil Index ETF (EWZ - Cramer's Take - Stockpickr), homebuilders and cellular companies." Fast Money's Brazil Stock Picks include Cisco (CSCO - Cramer's Take - Stockpickr) and Potash (POT - Cramer's Take - Stockpickr) among others.
Fast Money's Construction Short Trades: Construction spending has fallen by the largest amount in 14 years and manufacturing activity contracted, troubling sings for a already depressed U.S. economy. On Tuesday's "Fast Money" show, Karen Finerman told viewers, "Although they are a conglomerate, they have a pretty big exposure to the construction space with their HVAC, Carrier and Otis elevator businesses. I think you can short United Technologies(UTX - Cramer's Take - Stockpickr)." Check out the Fast Money's Construction Short Trades which also includes Ingersoll-Rand (IR - Cramer's Take - Stockpickr).
Wednesday, March 5, 2008
Sector Wrap: Agricultural Chemicals
Agricultural Chemicals Gain As Analyst Offers Bright Outlook for Genetically Modified Seeds
NEW YORK (AP) -- Shares of agricultural chemical companies rose on Wednesday, after a Credit Suisse analyst forecast strong demand for genetically modified seeds while beginning coverage of several companies in the sector.
Credit Suisse's M.W. Connelly said genetically modified seeds will help meet rising demand for food in emerging markets that have greater urgency to feed growing populations.
Connelly expects the sector to "stage a strong comeback" in 2008, with strong pricing driving profit, and rated the industry "Overweight."
Connelly started Monsanto Co. at "Neutral" with a $131 price target and forecast gains from Roundup herbicide and a deal with Dow AgroSciences for SmartStax, a new corn seed more resistant to bugs and weeds. Monsanto and Dow are developing and marketing SmartStax and hope to have the product to market by the end of the decade.
"After the stunning success with the corn triple stack, Monsanto has first mover advantage again with SmartStax, and we expect a similar outcome this time around," Connelly wrote in a client note.
Shares of Monsanto rose $3.53, or 3.2 percent, to $115.25.
Meanwhile, Connelly started DuPont Co. at "Outperform" with a $57 price target but said DuPont trails Monsanto in the seed segment and isn't likely to catch up.
However, Connelly said investors are underestimating the value in DuPont's BioScience pipeline,
which Connelly thinks will deliver "a rich source of opportunity and profit."
Dupont advanced 87 cents to $47.30.
Also, Connelly started Syngenta AG at "Outperform" and touted its position in seeds and traditional chemicals, in addition to margin improvement and Syngenta's ability to generate cash. Shares rose $1.41, or 2.5 percent, to $58.24.
NEW YORK (AP) -- Shares of agricultural chemical companies rose on Wednesday, after a Credit Suisse analyst forecast strong demand for genetically modified seeds while beginning coverage of several companies in the sector.
Credit Suisse's M.W. Connelly said genetically modified seeds will help meet rising demand for food in emerging markets that have greater urgency to feed growing populations.
Connelly expects the sector to "stage a strong comeback" in 2008, with strong pricing driving profit, and rated the industry "Overweight."
Connelly started Monsanto Co. at "Neutral" with a $131 price target and forecast gains from Roundup herbicide and a deal with Dow AgroSciences for SmartStax, a new corn seed more resistant to bugs and weeds. Monsanto and Dow are developing and marketing SmartStax and hope to have the product to market by the end of the decade.
"After the stunning success with the corn triple stack, Monsanto has first mover advantage again with SmartStax, and we expect a similar outcome this time around," Connelly wrote in a client note.
Shares of Monsanto rose $3.53, or 3.2 percent, to $115.25.
Meanwhile, Connelly started DuPont Co. at "Outperform" with a $57 price target but said DuPont trails Monsanto in the seed segment and isn't likely to catch up.
However, Connelly said investors are underestimating the value in DuPont's BioScience pipeline,
which Connelly thinks will deliver "a rich source of opportunity and profit."
Dupont advanced 87 cents to $47.30.
Also, Connelly started Syngenta AG at "Outperform" and touted its position in seeds and traditional chemicals, in addition to margin improvement and Syngenta's ability to generate cash. Shares rose $1.41, or 2.5 percent, to $58.24.
Coverage initiated on Monsanto by Credit Suisse
Credit Suisse initiated coverage on DuPont (DD: with an outperform rating and a 343 Swiss franc price target. "Genetically modified seed will almost certainly be the most important element to addressing growing world food demand over the next half decade," the broker said. It said that DuPont's number two seed position in North America looks secure, but the gap with Monsanto is likely to grow. Meanwhile, Monsanto's market leadership also looks secure for much of the next decade, but there are fewer near-term catalysts for the stock. On Syngenta, the broker said that its position in seed may come under pressure but its leading position in agricultural chemicals is likely to keep investors happy. Syngenta shares fell 1.4% in Swiss trading
Tuesday, March 4, 2008
Terex Shares Fall on Valuation Worries
Shares of Terex Tumble After Analyst Downgrades Citing Recent Run Up
NEW YORK (AP) -- Shares of Terex Corp. tumbled Tuesday on analyst comments that other heavy equipment companies offer better potential near-term returns for investors.
Terex shares shed $1.84, or 2.7 percent, to close at $66, after dropping as low as $64.27 earlier in the day. Over the past 52 weeks, the company's shares have traded between $46.50 and $96.94.
Terry Darling of Goldman Sachs cut his rating for Terex to "Neutral" from "Buy," citing its recent run up in share price and close proximity to his $70 price target.
"We remain positive on Terex' longer-term growth opportunities, potential internal efficiencies, strong balance sheet and high exposure to rising infrastructure spending," Darling wrote in a note to investors.
"However, shares have recovered (up 12 percent since Feb. 1) from an oversold position on solid fourth-quarter earnings per share and 2008 guidance."
Darling said he prefers the commodity exposure of Buy-rated CNH Global NV and Deere & Co., both farm equipment companies, and mining equipment maker Bucyrus International Inc.
The analyst also on Tuesday upgraded electrical components maker Eaton Corp. to "Conviction Buy" from "Neutral," saying its share have the potential to grow and it could be a defensive stock in the current economic environment.
Eaton shares slipped 5 cents to $82.06.
NEW YORK (AP) -- Shares of Terex Corp. tumbled Tuesday on analyst comments that other heavy equipment companies offer better potential near-term returns for investors.
Terex shares shed $1.84, or 2.7 percent, to close at $66, after dropping as low as $64.27 earlier in the day. Over the past 52 weeks, the company's shares have traded between $46.50 and $96.94.
Terry Darling of Goldman Sachs cut his rating for Terex to "Neutral" from "Buy," citing its recent run up in share price and close proximity to his $70 price target.
"We remain positive on Terex' longer-term growth opportunities, potential internal efficiencies, strong balance sheet and high exposure to rising infrastructure spending," Darling wrote in a note to investors.
"However, shares have recovered (up 12 percent since Feb. 1) from an oversold position on solid fourth-quarter earnings per share and 2008 guidance."
Darling said he prefers the commodity exposure of Buy-rated CNH Global NV and Deere & Co., both farm equipment companies, and mining equipment maker Bucyrus International Inc.
The analyst also on Tuesday upgraded electrical components maker Eaton Corp. to "Conviction Buy" from "Neutral," saying its share have the potential to grow and it could be a defensive stock in the current economic environment.
Eaton shares slipped 5 cents to $82.06.
Sector Catalysts for SPX New Lows
The $SPX made new intraday lows to 1320.04 on the 2:50PM bar, and then from nowhere came a move that took the $SPX up to the 1331.34 marginal +.05 close. However, for daytraders this was the second RST long profitable opportunity on the day. The other major indexes all closed on the minus side, led by the Nasdaq 100 ETF (NYSE:QQQQ - News) (-0.7%) Energy and many commodity related stocks like Freeport McMoran (NYSE:FCX - News), Monsanto (NYSE:MON - News), and Arch Coal (NYSE:ACI - News) finished green, with the Energy SPDR (NYSE:XLE - News) +1.3%, AMEX Gold Index +3.2%, and Materials SPDR (NYSE:XLB.TO - News) +1.7% NYSE volume was 1.57 bill shares, with the volume ratio 46 and breadth -280.
Despite all the spin by the pundits, Fed, and Administration, the derivative meltdown and credit crisis continues to expand, and this will result in new bear market lows as the $SPX 1270.05 low gets taken out. The low close in this decline is 1310.50 (1/22/08) while the 1270.05 low was 1/23/07, just before 1:00PM, followed by the Â"mystery moveÂ" that carried the $SPX to a 1338.60 close that day. If you don`t think that was the PPT (Plunge Protection Team) at work, I have a bridge in Brooklyn you can buy. The financial stocks declined for the third straight day with the $XBD is -9.9% and $BKX -9.3% Both Morgan Stanley (NYSE:MS - News) and Lehman Brothers (NYSE:LEH - News) made new bear market lows yesterday while the NYX (NYSE Euronext) also made a new bear market low. This market action does not indicate that 1270.05 was the bear market low. The energy and commodity stocks have been holding this market up and are now obviously very extended as the Â"herdÂ' all chases the same stocks for lack of anything else to buy. A sell off in these sectors right now would be a catalyst for new market lows. The brokers have attempted to spin the technology story once again, but one look at the QQQQ daily chart tells you nobody is listening yet.
It will take more than spin by the Fed to prevent another meltdown move in the major indexes, and the news catalyst will be derivative/credit crisis related. The $GOLD futures closed at 983.68 yesterday, so the odds are very high that the $1000 magnet gets taken out with the current weakness in the $US dollar index, which closed at 73.68
The $SPX futures are -11.5 points as I complete this commentary at 8:10AM ET, with the Intel (NYSE:INTC - News) and Citigroup (NYSE:C - News) news as the main culprits, so the extended volatility strategies will be the first thing in play for daytraders this morning.
Despite all the spin by the pundits, Fed, and Administration, the derivative meltdown and credit crisis continues to expand, and this will result in new bear market lows as the $SPX 1270.05 low gets taken out. The low close in this decline is 1310.50 (1/22/08) while the 1270.05 low was 1/23/07, just before 1:00PM, followed by the Â"mystery moveÂ" that carried the $SPX to a 1338.60 close that day. If you don`t think that was the PPT (Plunge Protection Team) at work, I have a bridge in Brooklyn you can buy. The financial stocks declined for the third straight day with the $XBD is -9.9% and $BKX -9.3% Both Morgan Stanley (NYSE:MS - News) and Lehman Brothers (NYSE:LEH - News) made new bear market lows yesterday while the NYX (NYSE Euronext) also made a new bear market low. This market action does not indicate that 1270.05 was the bear market low. The energy and commodity stocks have been holding this market up and are now obviously very extended as the Â"herdÂ' all chases the same stocks for lack of anything else to buy. A sell off in these sectors right now would be a catalyst for new market lows. The brokers have attempted to spin the technology story once again, but one look at the QQQQ daily chart tells you nobody is listening yet.
It will take more than spin by the Fed to prevent another meltdown move in the major indexes, and the news catalyst will be derivative/credit crisis related. The $GOLD futures closed at 983.68 yesterday, so the odds are very high that the $1000 magnet gets taken out with the current weakness in the $US dollar index, which closed at 73.68
The $SPX futures are -11.5 points as I complete this commentary at 8:10AM ET, with the Intel (NYSE:INTC - News) and Citigroup (NYSE:C - News) news as the main culprits, so the extended volatility strategies will be the first thing in play for daytraders this morning.
Using ETFs to Build a Winning Portfolio
The abundance of different types of ETFs can be overwhelming to newcomers, but when utilized in the right manner, they can provide a significant edge to investors.
Here are four key advantages for investors looking to utilize ETFs in an attempt to build a winning portfolio:
Sector Bets
ETFs provide a way for individual investors to bet on a sector or industry and achieve a fair amount of diversity in the process.
For instance, an investor looking to add an agriculture play to his or her portfolio might be eyeing companies such as AgriumAGU, MonsantoMON, MosaicMOS or PotashPOT.
Rather than trying to choose between these alternatives, the investor might be better served in this case by going with an ETF.
Chris Johnson, CEO and Market Strategist of Johnson Research Group, is bullish on the PowerShares DB Agriculture FundDBA, which is a bet on the underlying commodities that have been fueling the agriculture boom for these companies. The ETF is comprised of wheat, corn, sugar and soybean futures. The fund is up 28.1% year to date, vs. a negative 6.0% return for the S&P 500.
"We use the ETF because it allows us to stay away from company-specific risk," Johnson said.
David Vomund also uses ETFs to achieve diversity. Vomund is the President and Founder of Vomund Investment Management, which specializes in ETFs. His firm recently used the iShares Dow Jones US Home Construction FundITB as a means of gaining exposure to the homebuilders.
"I love the way the fund is rising in the face of a constant stream of bad news," he said. "Just look at last Tuesday -- while the news headlines highlighted the biggest drop in housing prices in 20 years, this fund leapt over 6%."
The fund is up 17.5% year to date and has approximately 20 holdings, which include D.R. HortonDHI, KB HomeKBH, Pulte HomesPHM and Toll BrothersTOL.
Profitable Potash
On Monday’s show, Cramer offered what he called a surefire recipe for profits: Find out where the Big Money’s heading, and get there first.
Luckily, there seems to be a strategy that all the institutional investors historically follow, giving Homegamers the jump on Wall Street they need: Money managers generally review the market two months into the quarter to see what worked, then they buy those sectors and stocks for the final month. All you have to do is figure out the winners before the industry fat cats do, and then enjoy the ride up.
Or just let Cramer do the work for you. His research showed that agriculture, gold and natural gas outperformed in January and February, so the smart money should be in these sectors in March.
Potash makes the fertilizer that farmers are buying in bulk as they look to reap profits from sky-high wheat, corn and soybean prices. Fertilizer prices are way up, too. But that isn’t deterring farmers from ordering more. They’re doing whatever they can to increase their crop yields while the market’s in their favor.
Cramer likes POT because it’s one of the lowest-cost producers of potash in the industry. The company’s also one of the few with the ability to increase capacity. And the barriers to entry in the business are so high – $2.5 billion just to build a mine, let alone the additional infrastructure costs – fear of new competition is negligible.
And, of course, the fundamentals are here. Blowout quarter, raised guidance, big buyback, low multiple. In fact, if Potash at $158 traded up to a multiple that was just half its 107% earnings growth rate, Cramer said, the stock would be worth $383.
But this is just one of the Cramer’s top three picks for March. Don’t miss his gold and natural gas picks, either. And watch the video for an in-depth look at Potash’s potential for profits.
Luckily, there seems to be a strategy that all the institutional investors historically follow, giving Homegamers the jump on Wall Street they need: Money managers generally review the market two months into the quarter to see what worked, then they buy those sectors and stocks for the final month. All you have to do is figure out the winners before the industry fat cats do, and then enjoy the ride up.
Or just let Cramer do the work for you. His research showed that agriculture, gold and natural gas outperformed in January and February, so the smart money should be in these sectors in March.
Potash makes the fertilizer that farmers are buying in bulk as they look to reap profits from sky-high wheat, corn and soybean prices. Fertilizer prices are way up, too. But that isn’t deterring farmers from ordering more. They’re doing whatever they can to increase their crop yields while the market’s in their favor.
Cramer likes POT because it’s one of the lowest-cost producers of potash in the industry. The company’s also one of the few with the ability to increase capacity. And the barriers to entry in the business are so high – $2.5 billion just to build a mine, let alone the additional infrastructure costs – fear of new competition is negligible.
And, of course, the fundamentals are here. Blowout quarter, raised guidance, big buyback, low multiple. In fact, if Potash at $158 traded up to a multiple that was just half its 107% earnings growth rate, Cramer said, the stock would be worth $383.
But this is just one of the Cramer’s top three picks for March. Don’t miss his gold and natural gas picks, either. And watch the video for an in-depth look at Potash’s potential for profits.
Cramer's 'Mad Money' Recap: Stellar Commodity Stocks
"Investors need to stick with what's working and not take unnecessary risks," Jim Cramer told viewers of his "Mad Money" TV show Monday.
Cramer identified three bull markets that are working right now: agriculture, gold and natural gas. He said the biggest factor contributing to their success is that the earnings estimates are just too low.
Agriculture is a twice-blessed sector, says Cramer, with growth being driven by both global famine and an increased demand for corn-based ethanol. He predicts corn and wheat are headed toward $16 a bushel.
Cramer has long liked the agriculture sector, especially such stocks as John Deere (DE - Cramer's Take - Stockpickr), Mosaic (MOS - Cramer's Take - Stockpickr), Monsanto (MON - Cramer's Take - Stockpickr) and Agrium (AGU - Cramer's Take - Stockpickr).
Now he believes the company best positioned to take advantage of this coming boom in
commodity prices is Potash (POT - Cramer's Take - Stockpickr).
Cramer says Potash, which closed Monday at $157.36, about $11 off its 52-week high, is all about growth. The company is poised to grow 107% in 2008 and is expected to increase its potash production from 10.7 million tons to 15.7 million tons by year end.
And with the high cost of entry, Cramer expects little, if any, new competition to challenge Potash's dominance.
Potash reported a better-than-expected quarter in January and trades at only 22 times earnings. It also has a stock buyback program that Cramer finds attractive.
Cramer predicted Potash could trade as high as $383 a share.
Going with Gold
Cramer said he sees a bull market in gold, and taking a cue from Peter Marone, CEO of Yamana Gold (AUY - Cramer's Take - Stockpickr), a stock which he owns for his charitable trust, Action Alerts PLUS, says the commodity could reach $1600 per ounce.
Since Cramer first recommended Yamana Gold back on June 6, 2006, gold has risen 56%, while Yamana has risen over 100%.
But Cramer now recommends Agnico-Eagle Mines (AEM - Cramer's Take - Stockpickr) as the gold stock to own.
According to Cramer, Agnico is the second lowest cost producer of gold behind Yamana, and after interviewing the company's CEO last Friday, he says the company's story is just too good to pass up.
Cramer cited the American Stock Exchange's gold index as one measurement of how undervalued the gold stocks are. According to the index, the entire gold sector has only a $200 billion market cap, while a company like ExxonMobil (XOM - Cramer's Take - Stockpickr) is valued at more than $400 billion.
Cramer said the gold stocks as a whole should be valued at double their current levels.
"Very rarely do I mention a company two nights in a row," said Cramer, "But I believe so strongly in gold and Agnico that I just had to go more in-depth again tonight."
Strong Insider Buying
When oil gets too expensive and coal gets too dirty, Cramer says investors look towards natural gas. And that's why he predicts that natural gas is headed to $16. Cramer said he's returning to an old favorite as the best natural gas stock: Chesapeake Energy (CHK - Cramer's Take - Stockpickr).
Chesapeake is the largest driller and producer of natural gas in the U.S., with over 15 trillion
cubic feet in reserve. Cramer said he likes the company for its production growth and strong insider buying.
Cramer said Chesapeake is set to increase its production by 21% this year and is the most levered to the rising price of natural gas. He says both attributes make the company very attractive.
But Cramer said he's most impressed with the company's strong insider buying. He explained that there are dozens of reasons why a company's executives may sell stock, including estate planning, retirement and divorce. "But there is only one reason why executives buy stock in their own company," Cramer said, "and that's to make money."
Cramer identified three bull markets that are working right now: agriculture, gold and natural gas. He said the biggest factor contributing to their success is that the earnings estimates are just too low.
Agriculture is a twice-blessed sector, says Cramer, with growth being driven by both global famine and an increased demand for corn-based ethanol. He predicts corn and wheat are headed toward $16 a bushel.
Cramer has long liked the agriculture sector, especially such stocks as John Deere (DE - Cramer's Take - Stockpickr), Mosaic (MOS - Cramer's Take - Stockpickr), Monsanto (MON - Cramer's Take - Stockpickr) and Agrium (AGU - Cramer's Take - Stockpickr).
Now he believes the company best positioned to take advantage of this coming boom in
commodity prices is Potash (POT - Cramer's Take - Stockpickr).
Cramer says Potash, which closed Monday at $157.36, about $11 off its 52-week high, is all about growth. The company is poised to grow 107% in 2008 and is expected to increase its potash production from 10.7 million tons to 15.7 million tons by year end.
And with the high cost of entry, Cramer expects little, if any, new competition to challenge Potash's dominance.
Potash reported a better-than-expected quarter in January and trades at only 22 times earnings. It also has a stock buyback program that Cramer finds attractive.
Cramer predicted Potash could trade as high as $383 a share.
Going with Gold
Cramer said he sees a bull market in gold, and taking a cue from Peter Marone, CEO of Yamana Gold (AUY - Cramer's Take - Stockpickr), a stock which he owns for his charitable trust, Action Alerts PLUS, says the commodity could reach $1600 per ounce.
Since Cramer first recommended Yamana Gold back on June 6, 2006, gold has risen 56%, while Yamana has risen over 100%.
But Cramer now recommends Agnico-Eagle Mines (AEM - Cramer's Take - Stockpickr) as the gold stock to own.
According to Cramer, Agnico is the second lowest cost producer of gold behind Yamana, and after interviewing the company's CEO last Friday, he says the company's story is just too good to pass up.
Cramer cited the American Stock Exchange's gold index as one measurement of how undervalued the gold stocks are. According to the index, the entire gold sector has only a $200 billion market cap, while a company like ExxonMobil (XOM - Cramer's Take - Stockpickr) is valued at more than $400 billion.
Cramer said the gold stocks as a whole should be valued at double their current levels.
"Very rarely do I mention a company two nights in a row," said Cramer, "But I believe so strongly in gold and Agnico that I just had to go more in-depth again tonight."
Strong Insider Buying
When oil gets too expensive and coal gets too dirty, Cramer says investors look towards natural gas. And that's why he predicts that natural gas is headed to $16. Cramer said he's returning to an old favorite as the best natural gas stock: Chesapeake Energy (CHK - Cramer's Take - Stockpickr).
Chesapeake is the largest driller and producer of natural gas in the U.S., with over 15 trillion
cubic feet in reserve. Cramer said he likes the company for its production growth and strong insider buying.
Cramer said Chesapeake is set to increase its production by 21% this year and is the most levered to the rising price of natural gas. He says both attributes make the company very attractive.
But Cramer said he's most impressed with the company's strong insider buying. He explained that there are dozens of reasons why a company's executives may sell stock, including estate planning, retirement and divorce. "But there is only one reason why executives buy stock in their own company," Cramer said, "and that's to make money."
Monday, March 3, 2008
The Top 10 Stocks Since the Last Recession
Now that it looks like we're headed into an economic downturn, we asked ourselves, "What types of companies do we want to own?" Should we load up on defensive stocks? Should we look for outstanding companies at great prices? Or do we stay out of the market altogether?
In order to get after these questions, we decided to run a screen for the top 10 performing domestic stocks since the beginning of our last recession, which occurred from March 2001 to November 2001. Our screen looked for domestic stocks that were valued above $250 million and traded on the major exchanges -- stocks the individual American investor would have been likely to actually buy.
Overall, we were a bit surprised by the results.
One word, Benjamin: EnergyThe top 10 performers since the beginning of the last recession are listed below (and their performance during the recession is included in column 3):
In order to get after these questions, we decided to run a screen for the top 10 performing domestic stocks since the beginning of our last recession, which occurred from March 2001 to November 2001. Our screen looked for domestic stocks that were valued above $250 million and traded on the major exchanges -- stocks the individual American investor would have been likely to actually buy.
Overall, we were a bit surprised by the results.
One word, Benjamin: EnergyThe top 10 performers since the beginning of the last recession are listed below (and their performance during the recession is included in column 3):
As you can see, even though some of these stocks -- such as Research In Motion and Terra Industries -- got whacked by investor pessimism during the last recession, their long-term returns have more than made up for it.
Also, we expected that many of these companies would be small ones, and sure enough, seven of the 10 were small. But we didn't expect that three of the companies would come from oil and gas operations, and another one from mining. Who would have placed bets on those sectors back in the spring of 2001?
Conventional wisdom holds that the energy sector would be hurt in a recession. As the economy slows down, the demand for energy declines, which eventually shows up on the bottom lines of companies in that sector.
As a result, followers of conventional wisdom would have been unlikely to invest in the top two companies on this list back in March 2001 -- two companies that did fine both during the recession and after.
20/20 foresightWe may or may not be in a recession right now, but our above list of outperformers since the last recession provides us with some helpful guidance for the current market. Here are just a couple takeaways:
The specter of recession should not prevent you from making long-term investments in great companies that you've researched and valued. Buying Apple was a great decision back in March 2001, even though consumer spending would slow for the next eight months or so. Indeed, Apple was just ranked No. 1 in The Wall Street Journal's Honor Roll of companies over a long-term time horizon. As Legg Mason's Bill Miller recently advised us, Fools should ignore the noise of a possible recession and focus on buying the same great companies that we would anyway.
Trying to pick the next hot sector is pretty difficult. A recent table from The Wall Street Journal shows that the "Oil and Gas Production" sector was ranked fourth out of 70 over the past five years. The "General Financial" sector was dead last. Is this pattern likely to continue over the next five years? Who knows? Diversifying across many sectors and trying to find the best companies in each sector are both ways to diminish the importance of such a question.
The down low on downturnsSo what's the best way to approach a downturn in the economy? For smart investors, it may well be to do what they always do. Look for great companies at reasonable prices across a variety of sectors.
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