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By now, you must already have your list of potential studs and duds ready for this NFL season. But have you ever tried doing something similar with stocks, using your analytical skills to figure out which ones could win, or lose as a new season, or month begins?
That could be a good thing to do. I’m interested in studs, and some stocks with great value look so compelling right now that I think September could be a great month to add them to your roster. Without wasting time, take a quick look at two agricultural stocks that I think deserve a spot this month.
Seeds of opportunity
August was a very quiet month for seed giant Monsanto Company (NYSE:MON), with the stock just managing to cross over to positive territory. I have good reasons to believe that Monsanto stock will hold up stronger this month and over the long term.
After a solid planting season in the U.S., which helped the company’s seed sales grow 7% year over year for the nine months ending May 31, Monsanto Company (NYSE:MON) is poised to benefit from the Latin American primary crop planting season which will kick off in some days’ time.
Lady Luck has shone bright on Monsanto Company (NYSE:MON) lately. In June, the company’s next-generation Intacta RR2 PRO soybeans trait were cleared for commercial launch in Brazil, giving Monsanto a huge boost heading into the upcoming planting season. Monsanto considers Intacta a 100-million acre opportunity, so you can well imagine how significant Intacta could prove to Monsanto’s growth in the future.
For those who think E I Du Pont De Nemours And Co (NYSE:DD) is spreading its wings as fast in the southern hemisphere, here is a fact to consider: While E I Du Pont De Nemours And Co (NYSE:DD) owns 10% of Brazil’s soybeans market, nearly all the rest of it is in Monsanto Company (NYSE:MON)’s hands. With Intacta, Monsanto is making sure it stays at the forefront for years to come.
At 21 times earnings, Monsanto Company (NYSE:MON) stock may appear pricey, especially when E I Du Pont De Nemours And Co (NYSE:DD) is trading at a P/E of just 12. But I think Monsanto deserves its premium valuation, considering the compelling Latin American growth story. Monsanto’s earnings per share are likely to grow beyond a 20% clip for the year. The company also raised its dividends by 15% last month, and currently yields 1.8%. A buyback program is already under way since July 1.
Best of all, Monsanto generated a massive free cash flow of over $2 billion in the past twelve months. I am watching this one closely.
It may sound crazy, but…
The second company I like also sells seeds, but is an even bigger play in the fertilizer industry. You may call me crazy for remaining bullish on Agrium Inc. (USA) (NYSE:AGU) after the recent fiasco in the potash industry, but you must also know that Agrium can act as a great defensive bet even in the potash space amid all the chaos.
Since Agrium Inc. (USA) (NYSE:AGU) holds a berth in the potash cartel Canpotex together with Potash Corp./Saskatchewan (USA) (NYSE:POT) and Mosaic Co (NYSE:MOS), it cannot escape the uncertainties that have surfaced following the abrupt break down of the other cartel between Russia’s Uralkali and Belarus’ Belaruskali.
Truly speaking, Agrium Inc. (USA) (NYSE:AGU) has little to do with Potash Corp./Saskatchewan (USA) (NYSE:POT) — Only 4% of its total sales last year came from the nutrient. Comparatively, PotashCorp and Mosaic Co (NYSE:MOS) derived 41% and 30% , respectively, of their net sales in 2012 from potash.