We recently compiled a list of the 11 Best Potash Stocks to Buy According to Hedge Funds. In this article, we are going to take a look at where BHP Group Limited (NYSE:BHP) stands against other best potash stocks to buy according to hedge funds.
Potash is a group of minerals and chemicals that contain potassium, a vital nutrient for plants and animals. The term refers to compounds including potassium sulfate, potassium-magnesium sulfate, potassium nitrate, potassium carbonate, potassium oxide, and potassium chloride. Among these, potassium chloride (KCl), also known as muriate of potash (MOP), is the most commonly produced and used form of potash.
Potash is primarily used to produce fertilizers, which are essential for plant growth and development. Fertilizers containing potash help to support plant growth, increase crop yield, and enhance disease resistance. Additionally, potash helps to improve water preservation, making it an indispensable supplement to the natural nutrient content of soils. Soils often lack these essential nutrients, or growing crops have depleted them, making potash a necessary addition to maintain soil fertility. With approximately 95% of potash being used in fertilizers, its role in agriculture cannot be emphasized enough. The remaining 5% is used in the production of potassium-bearing chemicals, such as detergents, ceramics, pharmaceuticals, water conditioners, and alternatives to de-icing salt.
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Potash is mined from underground deposits, either through conventional underground ore mining or by injecting water into the underground ore body and extracting the resulting brine. According to a report by the Canadian Government, potash production was estimated at 67.5 million tonnes globally in 2023, with Canada contributing 32.4% of the global supply. Canada, Russia, and Belarus dominate global potash production and accounted for 65.9% of the total in 2023. Canada is the world’s largest producer and exporter of potash, with 11 active mines in Saskatchewan, producing 21.9 million tonnes and exporting 22.8 million tonnes in 2023, which accounts for over 41% of global exports.
Potash prices have fluctuated over the years, declining from 2013 to 2016 and remaining relatively low until 2020. However, in 2021, prices rose sharply due to strong demand, and the surge continued into 2022, peaking at $1,202 per tonne in April, driven by geopolitical tensions and the Russian invasion of Ukraine. By June 2023, prices had fallen to $328 per tonne as global supply concerns subsided.
Potash is a vital nutrient for plants and animals, and its importance in fertilizers cannot be overstated. As the world’s population continues to grow, the demand for potash is likely to increase.
An aerial view of a mining operation in action, with large trucks and yellow diggers.
Our Methodology
To compile our list of the 11 best potash stocks to buy according to hedge funds, we sifted through financial media reports and potash-related ETFs to find companies that are involved in the production and processing of potash. We then used Insider Monkey’s hedge fund database to rank 11 stocks with the largest number of hedge fund holders, as of Q3 2024. The list is sorted in ascending order of hedge fund sentiment.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
BHP Group Limited (NYSE:BHP)
Number of Hedge Fund Holders: 22
BHP Group Limited (NYSE:BHP) is one of the largest mining companies in the world, producing a diverse range of resources, including potash. The company is developing the Jansen Potash Project in Canada, which is expected to become one of the world’s largest potash mines upon completion. BHP Group’s (NYSE:BHP) potash operations focus on meeting the growing demand for fertilizers to support global food security.
BHP Group’s (NYSE:BHP) growth strategy in potash is centered around the Jansen project, which is expected to enter the market at the low end of the global cost curve. The Jansen potash project is a significant investment for the company, with Stage 1 of the project ahead of schedule and expected to commence production in late 2026. The project has the potential to create value for many decades and will position BHP Group (NYSE:BHP) as a major player in the global potash market. The company has already signed non-binding sales agreements for all potash production from its Jansen potash project and plans to convert these agreements into binding contracts within 12–18 months.
BHP Group Limited (NYSE:BHP) also plans to expand the project in future stages, which could potentially lead to significant increases in production and revenue. The company’s focus on potash is driven by the attractive long-term fundamentals of the market, with global demand expected to grow by around 70% by 2050. In addition to the Jansen project, BHP Group Limited (NYSE:BHP) is also exploring other opportunities to grow its potash business. The company’s investment in potash is a key part of its strategy to diversify its portfolio and reduce its reliance on commodities such as iron ore and coal.
Overall BHP ranks 6th on our list of the best potash stocks to buy according to hedge funds. While we acknowledge the potential of BHP as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than BHP but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
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