The agricultural chemicals industry is down by about 6.6% over the last 12 months, which makes the industry an interesting study from an investment point of view. There is a need to identify which companies in particular have just received a temporary setback and will soon be back on their feet, especially given the expected comeback of the international fertilisers market in 2016 on account of return of Chinese potash demand and better growth in South Asia, particularly in India, which is looking to optimize its food supply for its booming population. A helpful criteria in this matter is to seek which agricultural stocks are popular among hedge funds, since these professional managers spend a great deal of resources in researching the companies that they eventually choose to invest in. We have a compiled a list of five such companies, arranged according to their popularity amongst hedgies.
In the eyes of most traders, hedge funds are assumed to be underperforming, old investment tools of the past. While there are more than 8,000 funds in operation at present, Insider Monkey looks at only the aristocrats of this group, around 730 funds. Contrary to popular belief, Insider Monkey’s research revealed that hedge funds underperformed in recent years because of their short positions as well as the huge fees that they charge, not because they are not good at picking stocks on the long side of their portfolios. Hedge funds did in fact manage to outperform the market on the long side of their portfolios. In fact, the 15 most popular small-cap stocks among hedge funds has returned 102% since the end of August 2012, beat the S&P 500 Index by 53 percentage points (see the details here).
#5 Scotts Miracle-Gro Co (NYSE:SMG)
Investors with Long Positions (as of September 30): 27
Aggregate Value of Investors’ Holdings (as of September 30): $588.66 Million
During the third quarter the total number of hedge funds, among those that we track, holding Scotts Miracle-Gro Co (NYSE:SMG) in their portfolios increased by 5 while the value of these aggregate holdings appreciated by about 7%. So far this year the stock price of the $4.05 billion manufacturer of consumer lawn and garden products has appreciated by 5.8%. First Eagle Investment Management is the largest stockholder of Scotts Miracle-Gro Co (NYSE:SMG) within our database holding 5.77 million shares.
#4 Potash Corporation of Saskatchewan (USA) (NYSE:POT)
Investors with Long Positions (as of September 30): 31
Aggregate Value of Investors’ Holdings (as of September 30): $822.71 Million
The stock price of the $13.99 billion fertilizer company might be down by more than 51% so far this year, but that hasn’t scared away the smart money. During the third quarter, the total number of hedge funds invested in the company slightly increased by 1 while the value of their aggregate holdings slid by 9%, which was much less than the 37% fall in Potash Corporation of Saskatchewan (USA) (NYSE:POT)’s share price during this period. The world’s largest integrated fertilizer company just finished an $8 billion potash expansion that will increase capacity to 17 million tons by 2018. HSBC Securities recently upgraded the company to ‘Buy’ from ‘Hold’. Jim Simons‘ Renaissance Technologies owns about 5.13 million shares of Potash Corporation of Saskatchewan (USA) (NYSE:POT) valued at $105.38 million at the end of September.