There is a 7-company strong industry – Fertilizers – that is red-hot right now.
The Zacks Industry Rank is #14 out of 265, and it has been trending up for the last few weeks. I see a #85 six weeks ago, and I see a #47 last week.
Simply put, I am no expert on Fertilizer.
But the great Wall Street Journal weekly Barron’s put out a great article in August of this year, laying out the long-term BULL case.
“Fertilizer Stocks Gains Have Just Begun” - Barron’s, August 18th, 2018
With the planet’s population surging past 7.5 billion, you might expect steady demand for crops and also for the fertilizer that’s essential for crop yield.
Farming isn’t that easy. The mid-decade crash in grain prices threw the big agriculture stocks off the bull market’s back.
And even as farm icons like Deere have regained favor in the past two years, investors kept a wary distance from fertilizer sellers CF Industries,Mosaic andNutrien, concerned that new producers would weigh down pricing.
A plant-food glut hasn’t happened, and now looks unlikely.
And Wall Street has started warming to the industry.
All three fertilizer leaders got a lift in early August, after good second-quarter earnings. Yet the stocks still have a ways to go, says Charlie Neivert, the Cowen & Co. chemicals analyst who was ahead of the crowd when he turned bullish on fertilizer in early March.
“The new supply, which was coming on fairly rapidly, is slowing its advance,” says Neivert. “And demand, which constantly increases, is catching up.”
He sees 25% upside for the shares of Nutrien – the Saskatoon, Saskatchewan-based Canadian giant formed in the recent merger of PotashCorp and Agrium – and almost as much headroom for CF and Mosaic.
Prices of crops such as corn have been fairly stable, even amid the Trump administration’s trade war, while prices have been rising for fertilizers containing the three main plant nutrients: nitrogen, phosphorus and potassium.
“The fundamentals of the industry are improving,” says Nutrien CEO Chuck Magro, whose company is the industry’s largest. “By the 2020-21 year, the supply-demand fundamentals could even be tight.“
The Top Zacks Ranked Stocks—
CF Industries Holdings, Inc. (CF): It’s a Zacks #1 Rank (STRONG BUY) stock, with a B for Value, a B for Growth and an A for momentum.
This company is the global leader in transforming natural gas into nitrogen products. CF Industries agricultural customers use products as fertilizer, while industrial customers use nitrogen to dramatically reduce harmful emissions from manufacturing processes and for other purposes.
CF Industries is one of the largest manufacturers and distributors of nitrogen fertilizer and other nitrogen products in the world. CF Industries principal customers are cooperatives, independent fertilizer distributors, farmers and industrial users. CF Industries principal nitrogen fertilizer products are ammonia, granular urea, urea ammonium nitrate solution and ammonium nitrate.
CF Industries other nitrogen products include diesel exhaust fluid, urea liquor, nitric acid and aqua ammonia, which are sold primarily to industrial customers, and compound fertilizer products, which are solid granular fertilizer products for which the nutrient content is a combination of nitrogen, phosphorus and potassium.
The Mosaic Company (MOS): It’s a Zacks #2 Rank (BUY) stock, with a B for Value, a B for Growth and an A for Momentum. The PEG ratio is 2.45.
The company is one of the world's leading crop nutrition companies with a focus on potash and phosphate, two of three most vital nutrients. The company mine and process phosphate and potash minerals into crop nutrients, and then shipped via rail, barge and ocean-going vessel to customers in the major agricultural centers of the world.
The work of mining and processing potash and phosphate minerals is an energy- and water-intensive endeavor. Mosaic is an important driver of economic activity in each of operating communities.
Mosaic is a leader in the potash industry. Mosaic also own related refineries at each of the mines. Mosaic is one of the world's largest producers of finished phosphate products.
Mosaic own and operate mines and production facilities in North and South America which produce concentrated phosphate crop nutrients and phosphate-based animal feed ingredients.
Nutrien Ltd. (NTR): It’s a Zacks #2 Rank (BUY) stock with a lower C score for Value. But the PEG ratio is better at 1.43.
The company produces and sells fertilizers and related industrial and feed products. The company's products primarily include standard and granular potash; diammonium phosphate, monoammonium phosphate and phosphoric acid and ammonia, urea, nitric acid, ammonium nitrate and nitrogen solutions, as well as purified acids and phosphate feed products.
Nutrien Ltd., formerly known as Potash Corporation of Saskatchewan Inc., is headquartered in Saskatoon, Canada.
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Potash Corporation of Saskatchewan Inc. (NTR) : Free Stock Analysis Report
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