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Hedge Funds Split on Agricultural Chemical Stocks

Agricultural chemical manufacturing industry can be split into two main components; fertilizers, which constitute about 60% of US industry revenue and pesticides take up the rest of 40%. While fertilizers consist of commodity chemicals that contain nitrogen, phosphorous, or potassium, pesticides are a broader group of chemicals. In this article we will take a look at what smart money investors we track at Insider Monkey think about Agricultural Chemical industry by looking at the five most popular stocks among them.

We track prominent investors and hedge funds because our research has shown that historically their stock picks delivered superior risk-adjusted returns. This is especially true in the small-cap space. The 15 most popular small-cap stocks among a select group of investors delivered a monthly alpha of 80 basis points between 1999 and 2012 (see the details here).

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5. CF Industries Holdings, Inc. (NYSE:CF)

– Investors with Long Positions (as of March 31): 32

– Aggregate Value of Investors’ Holdings (as of March 31): $1.02 Billion

The $5.2 billion fertilizer company saw a decline in popularity among hedgies as the total number of funds tracked by us long CF fell by five during the first quarter. CF Industries Holdings, Inc. (NYSE:CF)’s stock price has slid by 45% since the beginning of the year, but it has a dividend yield of 5.37%. The decline comes amid significantly lower-than-expected profit reported by CF Industries for the past several quarters. On August 4, the stock registered a drop of 14% at the opening, the biggest one-day decline in eight years, after CF Industries’ EPS of $0.33 missed the consensus estimate by $0.35, while revenue of $1.13 billion was in line with analysts’ expectations.

 

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4. E I Du Pont De Nemours And Co (NYSE:DD)

– Investors with Long Positions (as of March 31): 32

– Aggregate Value of Investors’ Holdings (as of March 31): $3.24 Billion

The Wilmington-based science and technology company also saw the number of investors bullish on it decline by three during the first three months of 2016. The company is currently in  the process to complete its merger with Dow Chemical Co. and, recently, European antitrust regulators have opened an in-depth investigation into the transaction, citing concerns that it may reduce competition in crop protection, seeds and stifle innovation. For the second quarter, E I Du Pont De Nemours And Co posted better-than-expected figures with EPS of $1.24 topping the estimates of $1.10, while revenue of $7.06 billion was $50 million ahead of expectations.

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3. Potash Corporation of Saskatchewan (USA) (NYSE:POT)

– Investors with Long Positions (as of March 31): 23

– Aggregate Value of Investors’ Holdings (as of March 31): $793.78 Million

The number of investors from our database long Potash Corporation declined by three during the March quarter. the stock has inched down by more than 5% since the beginning of the year, as a lower global potash demand, particularly from China, has depressed prices, causing Potash Corporation of Saskatchewan to miss EPS and revenue estimates for the second quarter. In addition, the company reduced its third-quarter and full-year earnings outlooks to below the consensus estimates and reduced slashed its dividend to $0.10, after having cut it to $0.25 from $0.38 earlier this year.

2. Syngenta AG (ADR) (NYSE:SYT)

– Investors with Long Positions (as of March 31): 32

– Aggregate Value of Investors’ Holdings (as of March 31): $524.36 Million

Among the investors we track, the number of funds holding shares Syngenta AG (ADR) (NYSE:SYT) increased by six during the January-March period. The stock of the Swiss seed and pesticide maker is down by 1% so far this year. The company is currently being pursued by the state-owned ChemChina, which in July said it extended its takeover agreement worth $43 billion until at least September 13 and added that extensions to tender offers might appear until all the conditions are met. In July, Syngenta said it was conducting “constructive” discussions with the regulators and the deal was on track to be completed by the end of 2016.

 

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1. Monsanto Company (NYSE:MON)

– Investors with Long Positions (as of March 31): 51

– Aggregate Value of Investors’ Holdings (as of March 31): $2.45 Billion

The popularity of Monsanto Company (NYSE:MON) among investors in our database increased during the first quarter, as the number of investors bullish on the stock surged by 13. The stock has gained over 6% since the beginning of 2016, as Monsanto has been receiving takeover bids from German Bayer AG. Earlier this month, it was reported that Bayer was analyzing Monsanto’s financial accounts and might raise its offer of $55 billion, which Monsanto rejected, having said it was “financially inadequate”. Bayer’s due diligence on Monsanto is expected to be completed in a couple of weeks after which Bayer will make a decision whether or not to sweeten the offer. Meanwhile, analysts are trying to estimate a potential offer that would result in a deal between Bayer and Monsanto, with predictions ranging from $130 to $135 per share.

 

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Disclosure: None