Forget Facebook, Buy The Agriculture Stocks Instead - Investment Ideas
10 Maggio 2012 - 2:00AM
Zacks
With the Facebook IPO launching next week, and a string of hot
technology IPOs in the last year, all of the focus has been on
Silicon Valley and social media wunderkinds.
Yet there's a sector that has been quietly wracking
up record earnings in 2011 and which is poised to do the same in
2012. Not only that, it's cheap, with many companies trading with
single digit P/Es, well under the average of the S&P 500 which
is 13.
What is this mysterious sector?
Agriculture.
Corn!
The U.S. Department of Agriculture is expecting a
record corn crop of 48 million tons of corn, up 4.5 million tons,
this year. It's projected to be the largest crop in the last 75
years.
Globally, corn production is expected to rise 10%
to 946 million tons as several countries post records.
This has lit a fire under farmers who have gone on
a buying spree of new tractors, combines, fertilizers and crop
protection supplies.
Investors, however, have been ignoring many
agriculture stocks which have led to rising earnings estimates and
low valuations, a juicy combination.
Different Kinds of Agriculture Stocks
When you think of an "agriculture stock" you may
think of a seed maker like Monsanto or an equipment manufacturer
like Deere. But agriculture can encompass an assortment of
different areas.
The top three industries in which to find
agriculture stocks are:
- Farm Machinery
- Agriculture Products
- Fertilizers
Farm Machinery is the hottest of the industries. It has a Zacks
Industry Rank of 6 out of 265. Four of the nine stocks in the
industry are Zacks #1 Rank (Strong Buys). This is where you'll find
Deere and the other equipment makers.
Agriculture Products has a Zacks Industry Rank of
94 out of 265. There is only one Zacks #1 Rank (Strong Buy) out of
13 companies. These companies are the seed makers like Monsanto and
the food product companies like Bunge and Archer Daniels.
Fertilizers has a Zacks Industry Rank of 182 out of
265. There are no Zacks #1 Rank stocks out of the 10 companies in
this industry. The potash and phosphate fertilizer companies have
seen demand slow and prices have flattened.
Nitrogen, however, is still hot. It is used on
corn. Some companies handle all three fertilizers. Agrium, the only
Zacks #2 Rank (Buy) in the industry, is one of those. It just
reported record retail sales in the first quarter.
Four Of The Top Agriculture Stocks
1. AGCO (AGCO)
Makes agriculture equipment.
P/E = 7.8
Expected 2012 Earnings Growth: 23.4%
Zacks #1 Rank (Strong Buy)
2. CNH Global (CNH)
Makes agriculture and construction equipment.
P/E = 9.6
Expected 2012 Earnings Growth: 21%
Zacks #1 Rank (Strong Buy)
3. Titan International (TWI)
Makes wheels and tires for agriculture equipment
makers.
P/E = 10.8
Expected 2012 Earnings Growth: 66%
Zacks #1 Rank (Strong Buy)
4. Agrium (AGU)
Agribusiness company which operates over 1100
retail locations in North and South America and Australia. Also
produces nitrogen, phosphate and potash fertilizers.
P/E = 8.9
Expected 2012 Earnings Growth: - 4.2%
Zacks #2 Rank (Buy)
Stocks Getting Even Cheaper
In May, the agriculture stocks have gotten even
cheaper as investors have fled the sector.
Take a look at the 3-month chart for each of these
stocks. You can clearly see the May weakness across the sector.
This has created a buying opportunity to add solid companies to
your portfolio at a more attractive price.
Don't Follow The Herd
Most investors are focused on Facebook, Apple or
LinkedIn right now. But other opportunities await those who dig a
little deeper in other sectors.
The agriculture sector is still performing at the
top of its game. Demand for food isn't going to soften any time
soon. It is an opportunity to buy growth at cheap valuations.
Tracey Ryniec is the Value Stock Strategist for
Zacks.com. She is also the Editor of the Turnaround Trader and
Insider Trader services. You can follow her on twitter at
@TraceyRyniec.
AGCO CORP (AGCO): Free Stock Analysis Report
AGCO CORP (AGCO): Free Stock Analysis Report
AGRIUM INC (AGU): Free Stock Analysis Report
AGRIUM INC (AGU): Free Stock Analysis Report
CNH GLOBAL NV (CNH): Free Stock Analysis Report
CNH GLOBAL NV (CNH): Free Stock Analysis Report
TITAN INTL INC (TWI): Free Stock Analysis Report
TITAN INTL INC (TWI): Free Stock Analysis Report
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