Potash Widely Held Among Hedge Funds and Other Pro Investors

A confluence of global factors continues to keep shares of fertilizer producers near all-time highs. Worldwide demand, backed by everything from the subsidy-backed ethanol boom to booming economies in Asia, has pushed fertilizer prices higher as farmers are upping their yields in order to meet demand.

The recent run to $100 per barrel oil -- lofty oil prices keep demand for biofuels high -- has helped fertilizer companies, but concerns about a slowing global economy, which could reduce demand for oil and thus ease the demand for ethanol as well, have the potential to temper some of the enthusiasm for fertilizer stocks.

Nonetheless, industry leader Potash (NYSE: POT - News), a Canadian firm specializing in potash, a form of potassium carbonate, as well as nitrogen and phosphate, all of which have agricultural applications, is up about 11% year to date. Meanwhile, the industry's other giant, potash producer Mosaic (NYSE: MOS - News) has seen its shares gain 20% in 2008. Another producer, Agrium (NYSE: AGU - News), is awaiting approval for its $2.15 billion agreement to buy agricultural-products distributor UAP Holding (Nasdaq: UAPH - News).

Several institutional investors have had exposure to the fertilizer boom. Hedge fund Dawson Herman Capital Management, which "has traditionally invested in the growth sectors of the U.S. economy," according to its website, has substantial holdings in the sector. As of the end of 2007, its top-four U.S-listed equity holdings are fertilizer producers. During Q4, the firm trimmed its stakes in Terra Industries (NYSE: TRA - News), a firm that produces nitrogen and methanol products for agricultural and industrial markets, and CF Industries (NYSE: CF - News), which operates in two segments, nitrogen fertilizers and phosphate fertilizers. The firm also slightly increased its stakes in Potash and Mosaic. A list of the rest of Dawson's top U.S-listed equity holdings is available at tickerspy.com.

Potash proved to be the most popular fertilizer company among Pro investors in Q4. Among the 44 investment firms holding stakes in the company, the largest was a 20.1 million-share stake held by mutual fund giant Janus Capital Management. Meanwhile, Potash is also the favorite fertilizer stock among tickerspy members, though Terra Nitrogen (NYSE: TNH - News), an incredibly volatile master limited partnership (MLP) with a focus on nitrogen fertilizer products, and Compass Minerals (NYSE: CMP - News), a specialty fertilizer producer, are popular as well.