Insights: Bullish Fertilizer Stocks
Breakouts in global fertilizer/potash stocks -- buy• Technicals are beginning to respond to the consolidation within the agriculture chemical industry, where companies are striving to achieve economies of scale to survive. Another tailwind is visible in a key input cost for nitrogen fertilizers: natural gas, which is selling off to 10-month lows. Combined--technicals and favorable input costs--we view this as an attractive theme.
• Breakouts from multi-year base and bottom patterns are the norm in North American names, including: AGU, CF, IPI, and POT. All four are buys.
• Abroad, in Europe and EM, pullback opportunities are visible in OCI NV (OCI-NL), Incitec Pivot Ltd (IPL-AU), Sociedad Quimica y Minera de Chile (SQM), and Yara Int'l (YAR-NO), Here, too, all four are buys.
• For ETF investors, the Global X Fertilizers/Potash ETF (SOIL) is this theme's closest pure-play. The names highlighted above account for a 35.8% weighting.
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Agriumis a retailer of agricultural products and services in the U.S., Canada, Australia, Argentina, Brazil, Chile and Uruguay and a producer and wholesale marketer of nutrients for agricultural and industrial markets. Co. reported its business through two business units, Retail, which operates in North and South America and Australia, providing crop inputs and services directly to farmers; and Wholesale, which operates in North and South America and Europe, and produces, markets and distributes all major crop nutrients for agricultural and industrial customers both domestically and around the world.
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Our process begins by organizing all actively traded stocks into coherent sectors, then into logical industry groups. We then apply our proprietary relative strength tools to identify developing price trends. Once attractive trends are identified within a selected sectors or groups, we screen for individual stocks which we believe offer the best risk/reward profile. Vermilion offers U.S. and global equity market research products. Vermilion’s research team, which has received numerous awards and accolades, has a combined 70 year of experience in the analysis of investment securities.
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