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[ibmisout]

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http://beta.fool.com/victorklai/2013/05/02/cf-industries/332…
Pointing at Agriculture

Victor is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.


Some well known investors, including Jim Rogers, George Soros, Marc Faber, and Jeremy Grantham, have been pointing out the opportunities they see in agriculture. As intelligent as these gurus are, it doesn't take genius to understand what they're getting at.

Population

Consider the world population. As early as the 1800s, scholars like Thomas Malthus were already writing about how population growth would outpace the world's ability to sustain it. As it turns out, Malthus was really early. The chart below (courtesy of Allianz) shows that world population didn't start taking off until around 1960. Prior to that, the population grew at a fairly slow and steady rate.

At the current pace, world population could breach the 9 billion mark by 2050. To feed that many mouths, we're going to need to produce a lot of food. Meanwhile, the natural resources that are crucial to agriculture, like arable land and fertilizers, are being depleted at alarming rates. While these big, flashing, signs are pointing at problems for agriculture, they also reveal opportunities. With that in mind, here are a few companies you may want to consider.

CF Industries Holdings, Inc (NYSE: CF)

CF Industries is a $11.5 billion materials company based in the US. It's a leading manufacturer and distributor of fertilizer products in North America. The company has two business units, "Nitrogen" and "Phosphate," each named after the type of fertilizers it produces. As luck would have it, these natural resources are not only essential to plant life, but are also finite and irreplaceable. That puts CF Industries in a very important position in the world of agriculture. Meanwhile, the company also looks solid financially. It has a low debt, ample cash, and high liquidity. It's outperformed the broad market and its peers in terms revenue and earnings growth. In addition, its valuation looks relatively attractive -- both earnings and cash flow multiples are significantly lower than industry and market averages. All things considered, I think CF Industries has the wind at its back, both in terms of positive macro forces and strong company fundamentals.

Potash Corporation of Saskatchewan (NYSE: POT)

Potash Corporation is a $35 billion materials company based in Canada. It's the worlds largest diversified fertilizer company. It's main product is, you guessed it, "potash" (aka potassium). Potassium is another finite and irreplaceable natural resource that is essential to plant life. Being the world's largest producer of potassium makes Potash another very important company in the world of agriculture. By the numbers, Potash looks decent. Debt and liquidity ratios are about average, and are basically in line with peers. Revenue and sales growth have been stronger than the broad market, but weaker than its industry. The stock price looks to be fairly valued and valuation metrics also look to be in line with industry averages. While Potash looks average based on its financials, it does look to be in the right place at the right time. The same rising tide that lifts CF Industries may very well lift Potash's boat as well.

Monsanto Co (NYSE: MON)

Monsanto is a $56 billion materials company based in the US. It's one of the world's largest providers of agricultural products for farmers. Its primary products include seeds and herbicides. Though Monsanto has been at the center of controversy regarding "genetically modified organisms," its biologically engineered products allow farmers to increase their yields and that makes the company very important to modern day agriculture. Financially, the company looks to be in good shape. It has low debt levels and high liquidity. Revenue and earnings growth have been stronger than the market and are close to peers. Valuation, however, does look to be high. Monsanto trades at a premium to its industry and the broad market based on earnings and cash flow multiples. Regardless of whether or not you agree with Monsanto's practices, the company's ability to increase crop yields makes it a poster child for modern day "big agriculture."

Summing Up

As with most businesses in the materials sector, the companies we considered can be very cyclical and volatile. CF Industries and Potash in particular are not only sensitive to the business cycle, but may also be impacted by the prices surrounding the natural resources that they rely on. Case in point, there are no shortage of risks, so be sure to conduct thorough due diligence. If you decide to take a position, do it in moderation, as part of a properly diversified portfolio, and only at your own risk.


With less and less arable land available around the world, increasing yields from existing plots could become vitally important to keeping up with expected population growth. Cheap and effective fertilizers could be the key to achieving this goal. As the global leader in potash production, PotashCorp has established several barriers to entry that make it nearly impossible for competition to break through. Click here now to access The Motley Fool's premium research report that covers precisely what these barriers to entry are and details several other key reasons why PotashCorp presents such a compelling investment opportunity today.

[Datteljongleur]

Antwort auf Beitrag Nr.: 44.564.729 von ibmisout am 03.05.13 19:23:50

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