To be sure, the sector has been bid-up, as a wider community discovers the value of fertilizer and companion products amid the likely substantial increase in global food demand in the decade ahead.
Too late to get in on a fertilizer play? Hardly. P/Es are higher, so entry point is key, but with the above in mind, here's a revised review of the fertilizer producers, with the updated Sell/Stop Loss levels. They're ranked by risk, with the top stock, POT, being the lowest risk.
Potash Corp./Saskatchewan (NYSE: POT), December 28, 2007 price: $141, p/e 50. Stop Loss: $85. Current Price: $203, p/e 62. Revised Stop Loss: $170.
Potash remains the best of a very good bunch, due to its 20% global market share in the namesake fertilizer. Ideally, buy Potash on a pull-back to $185 or $180, as it's overbought, short-term, but keep in mind that POT may not pull back to that level.
The Mosaic Company (NYSE: MOS), January 14, 2008 price: $101, p/e 35. Stop Loss: $64. Current Price: $130, p/e 42. Revised Stop Loss: $97.
Mosaic also is well-positioned in phosphate and crop nutrients. Further, the fact that 66% of its revenue is internationally-based is especially appealing given the U.S. economic slowdown. Ideally, buy MOS on a pull-back to $120 or $115.
Agrium Inc. (NYSE: AGU), January 11, 2008 price: $72, p/e 30. Stop Loss: $43. Current Price: $88, p/e 27. Revised Stop Loss: $72.
A leader in nitrogen production, Agrium has large operations in the U.S. and South America, the former of which creates higher risk than POT or MOS. A better entry price for AGU would be closer to $80, but keep in mind AGU may not retreat to that level.
Stocks Analysis: POT, MOS, and AGU are moderate-risk stocks not suitable for low-risk investors. Top Pick: POT.
Disclosure: Lazzaro has no positions in stocks. In addition to private real estate holdings, he owns corporate and municipal bonds, and cash certificates of deposit.
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Reader Comments (Page 1 of 1)
4-29-2008 @ 6:56PM
Edwin Bernard said...
Ref: Three Stocks for the Food Boom by J. Lazaro
Isn't in uncanny that the advice Mr. Lazzaro gave to buy POT, MON and AGU at the pull back positions of $180, $115 and $80 respectively were reached in just a few days? By the tone of J's comments he didn't think this would happen in two trading days, or if at all. Now that we're there, does anybody think these stocks could drop even more? Comments would be much appreciated.