10 Agricultural Stocks Hedge Funds Are Taking a Bite Out Of
Meena is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
After identifying the most popular stocks among hedge funds (see our top 10 here) according to their third quarter 13F filings, we have decided to break down the top ten stocks that hedge funds love in agriculture industry. All of our ag companies should see future growth from a continued rise in population and an increasing level of prosperity in emerging countries. Our list includes the hundreds of hedge funds and prominent investors that are required by the SEC to disclose their public equity holdings quarterly. In descending order, we have outlined the most-loved agriculture stocks based on the aggregate number of funds owning each.
Terra Nitrogen Company had only three filers owning the stock, making it tenth on our list. Terra produces fertilizer products and trades above a couple of its largest competitors at 13x earnings, but the company has no debt and pays a dividend that yields 7.7%.
Scotts Miracle-Gro was tied for eighth with 8 filers. The garden care products company trades near the high end of the industry at 24x earnings even after being down 12% year to date. The stock's forward P/E of only 14x is a bit more intriguing though, as it means that investors might be overlooking the lawn company’s growth next year. Sell-side analysts predict EPS to average 10.8% a year over the next half-decade; Scotts also pays a solid dividend that yields 3.15%.
Syngenta AG was also tied for eight with a total of 8 filers at the end of 3Q. Syngenta is the Swedish chemical company that focuses on products to boost crop productivity. With a P/E of 22x and a five-year growth rate of only 7.5%, investors may be able to find better values among our other ag companies listed.
American Vanguard came in as our seventh most popular ag stock with 12 filers, after a net increase of 4 filers. The chemical company trades at the very upper end of the industry at 30x earnings and pays a low dividend that yields only 0.4%. Even so, we see value in American Vanguard and believe that at 30x trailing earnings this ag company could be undervalued; based on its five-year expected EPS growth rate of 32%, its PEG ratio comes in at a mere 0.88.
Rentech had 17 filers owning the company at the end of 3Q to come in sixth place. Not to be confused with Jim Simons' RenTech hedge fund (see the billionaire's top stock picks), Rentech the company is up over 100% year to date and now trades with a P/E well north of 100x earnings. Its forward earnings ratio of 25x puts the fertilizer company more in line with peers, but we remain cautious on if the company can continue its extraordinary stock appreciation, as annual earnings are expected to barely eclipse double-digit growth over the next half-decade.
Potash Corp. (NYSE: POT) saw a net decrease of 7 filers, but still had 20 filers at the end 3Q. Shares look to be a good buy at current levels, trading at 14.5x earnings. The aptly named Potash is the world’s largest producer of potash, but has seen share price weakness of late after missing Wall Street's earnings estimates in each of the last four quarters. A steady rebound in the global economy should help drive Potash’s five-year 15.5% expected earnings growth. The potash company also pays a 2% dividend yield.
Agrium (NYSE: AGU) comes in fourth with 23 filers, and is a crop nutrient producer that is up over 50% year to date, but still trades as one of the cheapest companies in the industry at 11x earnings and only 1.3x sales. Investors also appear to be misjudging the earnings of the company, as it trades at forward earnings of 10x. Activist Jana Partners recently bought more of Agrium to further push for a break up.
Mosaic (NYSE: MOS) came in third with 36 filers. Mosaic is like Potash in that it is monster ag company that focuses on potash production. Mosaic trades at only 13x earnings and pays a dividend that yields 1.8%. Mosaic should see steady growth as the global economy picks up. Compared to major competitor Potash, the expected growth is not as robust—only an 8% five-year CAGR for Mosaic—but Mosaic does trade as the better value play.
CF Industries Holdings (NYSE: CF) was in second with 46 filers after our largest net increase of 9 filers. This fertilizer company trades the cheapest of our 10 Ag stocks at only 8x earnings. CF is expected to grow earnings 20% this year, and investors are hoping this will continue its solid appreciation, as shares are up 50% year to date. CF calls George Soros its top billionaire of the hedge funds we track (check out all of Soros’ latest picks).
Monsanto Company (NYSE: MON) was by far the top ag company, with 54 filers owning the stock. Monsanto is one of the giants of our top 10, with a near $50 billion market cap. This seed company trades above other major peers at 24x earnings, but its forward P/E of 18x suggests there is still value for investors. Monsanto manages to pay a 1.6% dividend yield while offering investors solid growth—annual earnings expansion of 10% is expected by the Street through 2017.
This article is written by Marshall Hargrave and edited by Jake Mann. They don't own shares in any of the stocks mentioned in this article. The Motley Fool owns shares of CF Industries Holdings. Motley Fool newsletter services recommend Monsanto Company. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!