Hedge Funds Are Bullish About These Agriculture Plays

Severe drought and record heat is wreaking havoc on the mid-west food harvest. Lower farm yields and dwindling inventories have resulted in a 50% surge in corn prices over the past month with little relief in sight. But record food prices have created a boom for agricultural chemical companies. The sector is up 13% in the last month with traders are betting that higher food prices will boost demand for fertilizers.

The rally in the agricultural space has attracted the attention of institutional investors. Here are the top 4 fertilizer plays hedge funds are betting on:

Mosaic Co (NYSE:MOS)

Mosaic Co. (NYSE:MOS): On July 17, Mosaic reported their 4th quarter earnings. The company beat the Street’s expectations by reporting an EPS of $1.19, down 18% YoY due to weaker demand for potash and other agricultural products. However, management provided an optimistic industry outlook, stating that farmers will “have their foot on the accelerator” with regards to producing more grain due to record high agricultural prices.

Trading at 10.6x forward earnings, Mosaic is valued at a premium compared to its peers. With an estimated 5-year EPS growth rate of 8%, the stock trades at a rich 1.3 PEG ratio. However, Mosaic has the highest dividend yield in the industry at 1.75%.

In addition, several hedge funds have been building positions in Mosaic. Michael Kaufman at MAK Capital One doubled the size of his position during the 1st quarter bringing his total stake in the company to $77 million. Richard Chilton at Chilton Investment Company also increased his position by 30%, bringing his stake in the fertilizer company to $102 million. Billionaires Ken Fisher and Steven Cohen are also among Mosaic shareholders (see Steve Cohen’s top stock picks).

CF Industries Holdings (NYSE:CF): CF Industries has been the top performers in the fertilizer space. The stock is up 200% over the past 5 years and has returned 14% in the last month. The company reported record profits during the 1st quarter, posting an impressive 54% YoY increase in earnings to $5.54/share.

CF Industries is the cheapest stock in the fertilizer space. The stock trades at 8.3x forward earnings, below the company’s historical 10-12x forward multiple. The stock also has the lowest dividend yield in the industry at 0.81%.

Several hedge funds initiated positions in CF during the 1st quarter including Anthony Bozza at Lakewood Capital Management and Michael Messner at Seminole Capital. Billionaire Jim Simons’ Renaissance Technologies boosted its stake in CF by 62%. Simons’ hedge fund has the second largest position in CF among the 400 hedge funds we are tracking (see Renaissance’s biggest bets).

Potash Corp of Saskatchewan (NYSE:POT): Potash Corp, which was previously featured on Insider Monkey, posted sluggish 2nd earnings results on April 26th. The company reported a quarterly EPS of $0.56, missing the consensus estimates by $0.08. The company’s revenue was also down 20.8% on a YoY basis.

Potash Corp. is the most expensive stock in the fertilizer space trading at 12.3x forward earnings. However, analysts believe this premium multiple is justified due to the company’s exceptional growth profile. Potash Corp. is projected to grow EPS by 14% next year, giving the stock a 1.35 PEG ratio.

Several hedge funds have initiated positions in Potash Corp. during the 1st quarter including Paul Tanico atCastlerock Asset Management and Michael Karsch at Karsch Capital Management. The company is scheduled to release their 2nd quarter earnings after the bell on Thursday, July 26. Analysts expect a strong report with improved guidance on higher commodity and potash prices. Billionaires Richard Chilton, Steve Cohen, and James Dinan are among the top five holders of Potash (see Dinan’s bullish bets).

Agrium (NYSE:AGU): Agrium shares hit a new 52-week high following a strong earnings report on July 18th. Management raised their EPS guidance by 15% citing robust demand for agricultural products. The impressive results sparked a series of upgrades and target price hikes by equity analysts.

Agrium is one of the cheaper names in the industry. The stock trades at 9.2x forward earnings, slightly below the company’s 11.1x average forward multiple.

Hedge funds were actively building positions in Agrium during the 1st quarter including Wayne Cooperman at Cobalt Capital Management and Michael Messner at Seminole Capital. Value investor Joel Greenblatt and billionaire Israel Englander are among the hedge fund managers who initiated brand new positions in this stock (see Englander’s stock picks).

Dividend Stock Alert - Billionaire Robbins' Top Dividend Idea With 70% Upside Potential

Get Paid 3.5% Per Year While Waiting For The Stock Appreciate 70%

Larry Robbins' Glenview Capital Opportunity Fund returned 101.7% in 2013 and Robbins personally made $750 million. The same fund returned 25.3% in 2014. In this FREE REPORT we will share Robbins' top dividend idea that yields 3.5% and has been increasing its dividends for 39 consecutive years. Robbins thinks the stock has the potential to appreciate 70%.

This is a FREE report from Insider Monkey. Credit Card is NOT required.
Click here to Read Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 74 percentage points in 2.5 years. Our beta is only 1.2 (download a FREE newsletter and see the details inside)

Lists

Best Selling Magazines in the World

Shortest People in History

The Most Celebrated Holidays in the World

Most Expensive Handbag Brands in the World

Top Selling Comic Book Issues of this Century

The Most Powerful Women in Politics

Best Paid DJs

Most Rebellious Female Artists

Best Paid TV Actresses of 2014

Best Paid Actors of 2014

Most Expensive Horses in the World

Tallest People Ever

Most Encouraging Feminist Celebrities

Best Paid Supermodels of 2014

Top 10 Suburbs for Retirement in 2015

10 Wealthiest Cities in America

Top 10 TED Talks for Entrepreneurs

Best TED Talks on Education

25 Most Dangerous Places to Live in America

Top 10 Ski Resorts in the United States – 2014 List

Top 10 Most Remote Places in the World

Most Visited Museums in the United States

Wealthiest Photographers in the World

Most Famous Gay Athletes

The World’s Most Famous Circuses

Best Hair Stylists

Most Popular NASCAR Drivers

The Best Romance Movies of all Time

The Most Wanted Drug Lords

The Oldest Money Managers

The Greatest Directors in the World

Largest Animals in the World

World’s Most Expensive Desserts

Best Selling Comic Books of All Time

A-list Actors who Sabotaged Their Career

Rappers With a College Degree

The Best Jazz Albums of all Time

The Most Influential Jazz Musicians

The World’s Most Famous Photographers

The Best Oscar-Winning Songs

Most Influential Choreographers Ever

Most Expensive Department Stores in the World

The Most Expensive Stolen Paintings in the World

The World’s Most Expensive Teas

Top Oscar Record Holders

The Most Expensive Flowers in the World

Countries With a Booming Film Industry

Most Expensive Cupcakes in the World

Uncommon European Escapes

The Most Stolen Artists in History

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 129% in 2.5 years!! Wondering How?

Download a complete edition of our newsletter for free!