The Market Vectors Agribusiness ETF (MOO) , the largest ETF devoted to farming-related equities such as Monsanto (MON) and Deere (DE), has endured a disappointing 2013 with a loss of 3.3%. However, the $4.9 billion MOO got a modest lift on Monday on news of a well-regarded hedge fund manager announcing a stake in one of the ETF’s holdings.
Dan Loeb’s Third Point revealed in a letter to the fund’s investors that it has taken a stake in fertilizer producer CF Industries (CF). CF is MOO’s tenth-largest holding and had a weight of nearly 3.8% in the ETF as of Friday’s close. [ETF Spotlight: Agribusiness ETF]
News of Third Point’s stake sent CF soaring almost 12% on volume that was better than six times the daily average. Other fertilizer producers such as Potash (POT), Mosaic (MOS) and Agrium (AGU) also benefited with all three finishing higher Monday. Volume was well above average in all three names. Those three stocks combine for about 16.7% of MOO’s weight and all three are top-10 holdings in the ETF. [Agribusiness ETFs for Rising Food Prices]
“CF currently trades at an unwarranted discount to fertilizer and commodity chemical peers,” Loeb said in the letter obtained by Reuters. “We believe its structural cash flow generation strength is misunderstood and that management should deliver a much larger dividend to its shareholders.”
Loeb noted CF’s access to low-cost North American natural gas “gives the company a structural, sustainable margin capture relative to global peers with higher input costs.” Natural gas is a key ingredient in the production of nitrogen-based fertilizer, which CF mainly produces.
That could partially explain why CF shares have lagged this year. Heading into Monday’s trading session, the stock was down nearly 13% while the U.S. Natural Gas Fund (UNG) was up almost 4% year-to-date.
It has been fertilizer stocks that have hampered MOO this year. Of a group consisting of Agrium, CF, Mosaic and Potash, the best performer this year has been Mosaic, which was down 8.5% before Monday.
Market Vectors Agribusiness ETF
ETF Trends editorial team contributed to this post.
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- Dan Loeb