Top-Rated Stocks the Leaders Loathe

Momentum investors love to back companies with the wind in their sails. Contrarian investors typically pick up the cigar butts the market has tossed aside. So what do you call investors who turn against winners? Sourpusses? Shorts?

Not managing well
As a significant potash producer, and as the country's largest retail farm-store chain, Agrium has been one of the prime beneficiaries of the expanding production of ethanol. Even with some politicians calling for cutbacks in the program, because the voracious demand for corn is driving up prices and contributing to food shortages in various parts of the globe, there doesn't appear to be any end in sight to the ethanol boom. Agrium's CFO doesn't see the government having the will to do what would be tantamount to eliminating what he calls 5% of the U.S. gas supply -- at least not anytime soon.

As a result, potash producers such as Agrium, Potash Corp. of Saskatchewan (NYSE: POT), and Mosaic (NYSE: MOS) have been reaping the benefits by way of higher earnings. Farmers have been eager to boost production by adding beneficial nutrients to the soil to meet demand, and as a result, fertilizer companies have been reporting that their profits have doubled or tripled over the past year. Agrium expects its next earnings report to surpass its previous records.

Wits have taken to calling Potash Corp. of Saskatchewan the "Saudi Arabia of Potash," but no one is expecting any embargoes to be placed on fertilizer. Investors, in fact, are expecting a gusher of production to continue for all producers, including Agrium. CAPS player kingkamehameha sees the developing nations as an impetus for future growth:

Agrium is benefiting from the global demand for food in developing nations such as China, India and Russia. Fertilizer prices are soaring, and Agrium is one of the few companies in the world with significant market share. The US obsession with ethanol is also a plus for the company as it insures that prices for fertilizer will remain stable over the next year.

Although thinking Agrium will outperform the market, top-rated CAPS All-Star hondo928 notes that it and its fellow fertilizer companies do sport some fairly rich valuations at this point:

On [strictly] a relative level Agrium seems like a buy. Potash, Monsanto, and Mosaic have just been skyrocketing, and with [price-to-earnings ratios] of over 40 I just don't see how they can possibly be buys at this point. As far as earnings growth goes PEG is much better on Agrium at 1.3, while it's still not cheap, it's a good solid company, with much better fundamentals, the boom won't last forever, but I think that this is good for a few more percent at least.