Monday, February 15, 2010

Fertilizer Stock Report MON, POT, TNH


Investment Rationale
During the 2009 growing season farmers neglected to rebuild their depleted inventories due to high prices. My only guess is they assumed prices would come down. In result the fertilizer companies had week revenue from low demand. Many analysts are predicting strong demand going into the spring of 2010 for fertilizers and strong revenues from the fertilizer companies.
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Why Invest in Fertilizers
As the world continues to upgrade its standard of living, it has been observed that we as humans begin eating more meat. This is true in third world countries when people move up to the middle class their protein intake increases.  It takes nearly 16 pounds of grain to produce one pound of meat. This means if this trend continues our world will require more agricultural resources to produce protein in effect increasing the demand for fertilizer. 


Cross Sectional Analysis of Fertilizer stocks

Monsanto (MON)
Potash Corp (POT)
Terra Nitrogen (TNH)
Current price
 75.82
111.56
 104.51
52 Week Range
66.57-93.35
63.65-126.47
94.97-145.90
Stock Valuation



P/E
27.0
22.2
8.6
P/B
4.0
5.6
N/A
P/S
3.8
7.2
3.0
Dividend Yield
1.4%
0.4%
8.5%
Profitability 5yr



ROA
8.36
15.26
49.86
ROE
15.18
30.89
84.13
Forward Valuation



Forward P/E
17.2
13.8
N/A
PEG
1.3
0.8
N/A



Conclusion
Terra Nitrogen has one up on MON and POT if you are a value investor but POT will more than likely continue stronger growth. TNH has to pay out 90% or more of its earnings to share holders do to its partnership structure. The high dividend yield and low valuation ratios makes TNH the most attractive investment opportunity.

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6 comments:

  1. Dude, Monsanto is not a fertilizer stock, not even close actually...

    ReplyDelete
  2. John,
    Good for you for what you are doing with this blog. I have some suggestions to make it better. I'm not sure this is the proper place for in-depth criticism. Write to me if you'd like to hear it. ebbel123@gmail.com

    ReplyDelete
  3. I have some suggestions on making it better. Actually research what the companies do.

    ReplyDelete
  4. I didn't use Monsanto as a Fertilizer stock, I am well aware of their products. I used them for cross sectional analysis for their industry.

    ReplyDelete
  5. now tnh $80.00...evn a better bargin???

    ReplyDelete
  6. I really like this blog post, it has some great info. Thank you and keep up good work.

    Penny Stocks

    ReplyDelete