Six Socially Responsible Ways to Invest in Fertilizer Demand

Paul Dykewicz

Six socially responsible ways to invest in fertilizer demand include two large providers of the seasonal commodity, an agricultural exchange-traded fund (ETF) and three under-the-radar stocks that are projected to outperform the market.

Socially responsible investing (SRI) targets positive social change through companies that also can provide profitable returns for investors. The focus on sustainable investing to protect the environment and deter climate change is spurring companies to adopt policies favored by socially responsible shareholders.

Environmental, social and governance (ESG) policies are intended to measure the sustainability and ethical impact of investing in a business or a stock. Agriculture, fertilizer and landscaping are among the sectors that have been engaged in sustainable solutions for their businesses not only to safeguard the environment, but to serve customers and to provide good ESG investing opportunities.

Department of Agriculture Fund May Aid Ways to Profit from Fertilizer Demand

The U.S. Department of Agriculture (USDA) is supporting additional fertilizer production for American farmers to address rising costs by providing $250 million through a new grant program this summer to aid independent, innovative and sustainable American fertilizer production to supply American farmers. To address growing competitive concerns in the agricultural supply chain, USDA is launching a public inquiry seeking information about seeds and agricultural inputs, fertilizer and retail markets.

Recent supply chain disruptions from the global pandemic to Russia’s President Vladimir Putin’s “unprovoked war against Ukraine” have shown just how important it is to invest in this crucial link in the U.S. agricultural supply chain, said Agriculture Secretary Tom Vilsack, in a prepared statement.

ESG is a subset of non-financial performance indicators which include ethical, sustainable and corporate government issues such as making sure there are systems in place to ensure accountability and managing a corporation’s carbon footprint. Another potential lift for fertilizer investments is a recent agreement aimed at temporarily halting Russia’s blockade of shipments from Ukraine that are essential to avert worsening famine conditions in Africa.

Shipping Pact to Transport Food, Fertilizer and Grain Could Help Fight Hunger

A pact, arranged by the United Nations (UN) and Turkey, calls for Russia to allow ships to leave certain Ukrainian ports on the Black Sea under military escort, with cargo inspections, to ensure only food, fertilizer or grain is carried, not any other commodities. The agreement, if honored by Russia, would create a protected shipping corridor to help alleviate global food shortages for Ukraine’s customers who include some of the world’s poorest countries, including Eritrea in Africa.

Corn has been the key export since the agreement took effect last month but it typically is used for animal feed or to produce biofuel ethanol rather than food for humans. In addition, Russia showed the pact’s vulnerability by firing missiles at Ukraine’s biggest seaport hours after consenting on July 22 to allow grain to be transported from there.

Mosaic Joins Six Socially Responsible Ways to Invest in Fertilizer Demand

Mosaic Company (NYSE: MOS), a dividend-paying, Fortune 500 company headquartered in Tampa, Florida, mines phosphate, potash and urea. The largest U.S. producer of potash and phosphate fertilizer, Mosaic, aiming to meet key ESG targets by 2025, operates through segments such as international distribution and Mosaic Fertilizantes.

Support for Mosaic can help to counter Russia as a large global producer of potash, a key crop nutrient that is used in agricultural production. Strong growth in Mosaic’s year-over-year earnings per share (EPS) and rising prices for fertilizer from reduced supply out of Russia led to a surge in the value of MOS call options that recently were recommended by Jim Woods in his High Velocity Options trading service.

Woods specifically recommended MOS April 14 $50.00 call options in his High Velocity Options advisory service to produce a 128.72% gain. In March, Woods advised that his subscribers take profits after the options soared in value by 150% within a week. Those triple-digit-percentage gains show how call options can be a huge money maker.

Paul Dykewicz meets with Jim Woods, of the Successful Investing and Intelligence Report newsletters, as well as High Velocity Options.

Six Socially Responsible Ways to Invest in Fertilizer Amid Putin’s Policies

Fertilizer manufacturers appear likely to profit from Russia’s continuing attack against Ukraine, said Bryan Perry, leader of the Cash Machine investment newsletter. Perry, who also helms the Quick Income TraderBreakout Options Alert, Premium Income Pro and Hi-Tech Trader advisory services, acknowledged there may be “demand destruction” in the energy sector, but there won’t be in the global food supply.

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Paul Dykewicz interviews Bryan Perry, who heads the Cash Machine newsletter.

Wheat, corn and soybean prices jumped since the full revelation of the attack on Ukraine by Russia, Perry continued. One of the big winners from pure demand and sanctions will be CF Industries Holdings, Inc. (NYSE: CF), a dividend-paying manufacturer and distributor of agricultural fertilizers, including ammonia.

However, the company, based in Deerfield, Illinois, a suburb of Chicago, also faces increased distribution costs, especially for transportation. Those extra costs likely will be shifted to customers by the manufacturer.

In addition, the expense of producing nitrogen fertilizers is highly dependent on the cost of natural gas, which is the principal raw material and primary fuel source used in ammonia production at the company’s manufacturing facilities. For many global producers, more than 70% of the total cost to produce ammonia is based on the expense of natural gas.

The cost of natural gas varies significantly between geographic locations. European customers may see their financial burden grow, since natural gas prices have been surging there and Russia has cut the export of that commodity in an apparent attempt to squeeze energy-needy nations.

CF Industries, a global manufacturer that also provides hydrogen and nitrogen products, published a 2021 annual report and its sustainability reporting materials. The reports provide insight into the company’s clean energy strategy and substantial progress in 2021 towards its ESG goals.

Chart courtesy of www.stockcharts.com

Yet another big fan of CF Industries Holdings is Mark Skousen, PhD, who recently recommended it profitably in his Five Star Trader advisory service. Skousen also follows commodities closely as the head the Forecasts & Strategies investment newsletter.

Mark Skousen, a descendant of Benjamin Franklin, meets with Paul Dykewicz.

Ag Fund Ranks Among Six Socially Responsible Ways to Invest in Fertilizer

Despite the horrors of war, investors have a chance to profit from the jump in agriculture prices and other commodities through the futures markets. Instead of buying futures directly, investors can invest in diversified agricultural commodities through Invesco DB Agriculture (DBA), an exchange-traded fund recommended by Bob Carlson, a pension fund chairman who also leads the Retirement Watch investment newsletter. Investment funds such as DBA hold stocks such as Mosaic and CF Industries that increasingly are trying to adhere to ESG policies.

Chart courtesy of www.stockcharts.com

Ukraine’s democratically elected President Volodymyr Zelensky has been seeking to rally his countrymen since Russia’s Feb. 24 invasion to defend their nation as he has obtained guns, advanced weapons and ammunition from its allies. The cost in life and limb has been high for the Ukrainians and the Russians. The invader’s troops have included many conscripts, who, in some cases, have resisted fighting against Ukrainians.

With many commodity prices already rising substantially since Russia’s invasion, there may still be more such pressure in the months ahead in the fertilizer market due to what is happening in Ukraine. Oil, natural gas, grains and some metals may incur further further price hikes, Carlson cautioned.

AGCO Makes List of Six Socially Responsible Ways to Invest in Fertilizer

AGCO Corporation, a Duluth Georgia-based designer, manufacturer and distributor of agricultural equipment, offers a path to profit from the rising demand for fertilizer, said Michelle Connell, president and owner of Dallas-based Portia Capital Management.

Michelle Connell heads Dallas-based Portia Capital Management.

Sustainability-driven technology growth offers a roadmap that AGCO is taking in the right strategic direction, according to a recent research report by Chicago-based brokerage firm William Blair & Co. The investment firm’s analysts attended AGCO’s Sustainable Technology event in Germany, which included a discussion on growth opportunities such as Fendt globalization, precision agriculture and aftermarket sales growth.

AGCO offers products centered around sustainability and a regulatory outlook that includes a “Green Deal” in Europe, according to William Blair & Co. The company is on the “right path” toward providing customers with high-tech solutions to address the future economics and regulatory environment of farming, the analysts wrote.

“Ultimately, the longer-term growth for ag is being driven by the need for farmers to grow more and use fewer inputs/resources, which is a function of the regulatory environment, private investment, an increased focus on sustainability and the economic environment for growers,” wrote Lawrence De Maria, the lead analyst at William Blair & Co. on AGCO. The company has proven to be adept at providing commercial offerings that have short payback periods while enabling compliance, he added.

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Chart courtesy of www.stockcharts.com

Connell said she put AGCO through one of her financial screening tools and it showed the stock possessed “very strong fundamentals, as well as momentum.” She indicated the share price has upside of 30% from current levels.

“Thus, I would classify it as a growth and value play,” Connell told me.

JP Morgan’s analytical team also likes AGCO and described it as a strong food insecurity play. The JP Morgan analysts’ upside 12-month target is 15% from the current level.

A key challenge for the company is its need to produce enough machinery during the second half of 2022, since it appears to be manufacturing at capacity. Therefore, JP Morgan believes that the company’s revenue guidance for the back half of this year is quite conservative.

Connell counseled that her main concern is that AGCO’s largest revenue region is the European Union (EU), accounting for more than 50% of the company’s total sales. The EU is facing a severe recession, greater difficulties with power generation this winter and now the loss of the Rhine River as a means of transporting goods, she added.

One of these factors could negatively effect AGCO’s ability to produce or deliver its equipment before the end of 2022, Connell cautioned.

However, William Blair & Co. reported its main takeaways from its meeting in Germany included: 1) growth opportunities are tracking ahead of schedule and can provide $4.30-plus in incremental earnings per share through 2025, 2) the AGCO tech stack and retrofit-first approach addresses key technologies and differentiation, and will fit within the coming EU regulatory environment, 3) and AGCO’s portfolio and roadmap is well positioned to address the needs of growers for electrification, precision fertilizer, precision planting, autonomy, etc. Future portfolio adjustments, such as divestitures, are possible and aligned around the core business, while factory run-rates have improved following a ransomware incident, the investment firm added.

Six Socially Responsible Ways to Invest in Fertilizer Include Titan Machinery

Titan Machinery Inc. (NASDAQ: TITN), of Fargo, North Dakota, is one of the largest American dealers of agricultural and construction equipment. It is rated an “outperform” investment by William Blair & Co., which recently issued a favorable research report about the company after announcing a definitive agreement to acquire Heartland Ag Systems, a Hutchinson, Minnesota-based application equipment distributor, for $110 million. The valuation is 7.2 times 2021 earnings before interest, depreciation and amortization (EBITDA) and 5.6 times synergized run-rate EBITDA.

“The addition of Heartland expands Titan’s product offering and gives the company access to a complete line of Case IH application equipment such as self-propelled sprayers, floaters and fertilizer applicators,” wrote De Maria, who covers the company for William Blair & Co. ” This deal also provides the ability to realize incremental sales opportunities to package with tractors, tillage and construction equipment to the commercial application customer. Overall, it is believed that the integration will create a complete distribution model covering both farmers and commercial applicators, given Titan’s well-established footprint across the Upper Midwest.”

The combination also propels Titan into the precision agriculture space, where it does not have a strong presence, De Maria continued. It is expected that the deal could close as soon as this month and the transaction is viewed “very positively” by the investment firm.

“Heartland offers more heavily utilized products that are on a fixed replacement schedule, so we believe the addition should help reduce some cyclicality in Titan’s business,” De Maria wrote. “In addition, this should lead to a normalized purchasing schedule from professional organizations.”

Chart courtesy of www.stockcharts.com

SiteOne Landscape Is One of Six Socially Responsible Ways to Invest in Fertilizer Demand

Roswell, Georgia-based SiteOne Landscape Supply, Inc. (NYSE: SITE) describes itself as the largest and only national wholesale distributor of landscaping products in the United States and Canada. The company is a collection of many predecessor businesses aimed at helping customers become the most successful landscaping professionals in the green industry.

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The company should manage a housing downturn well due to its dominant market position and flexible business model, according to a recent research report by William Blair & Co. The company’ transformation from John Deere Landscapes to SiteOne Landscape Supply became official on October 19, 2015, but the investment firm wrote that the current valuation under-appreciates the long-term opportunity to consolidate the landscape distribution market.

In a recession, William Blair & Co. projected that new residential housing could decline 15%-20%, while new commercial and maintenance would stay flat, and repair and upgrade would dip 5%. SITE has been compounding EPS at 20% since its 2015 IPO via organic growth, mergers and acquisitions (M&A), as well as margin expansion, wrote Ryan Merkel, a William Blair analyst.

Even though SITE has 15% market share of a $23 billion market now, Merkel wrote that it has “runway to 30%-35% share.” M&A is highly value creative, with multiples of 5-6 times including synergies. Using 17 times our 2023 EBITDA estimate of $440 million, William Blair’s Merkel offered double-digit-percentage upside to $155.

With SiteOne able to manage a housing downturn well due to its dominant market position and flexible business model, William Blair rated the stock “outperform.?”

Chart courtesy of www.stockcharts.com

U.S. COVID Deaths Near 1.038 Million

COVID-19 cases and deaths can interfere with supply chains and affect demand for products such as fertilizer, particularly as prices for the seasonal commodity climb. As a result, investors must monitor the latest trends.

U.S. COVID-19 deaths climbed for the fifth consecutive week by more than 3,000 to 1,037,916, as of Aug. 16, according to Johns Hopkins University. Cases in the United States rose 794,047 in the past week to reach 92,343,316, showing a slight jump in the rate of increase from the previous week. America still holds the dreaded distinction as the country with the largest number of COVID-19 deaths and cases.

Worldwide COVID-19 deaths in the last week increased 16,857, down from 18,318 last week, but up from 16,513 the prior week, totaling 6,440,713, as of Aug. 16, according to Johns Hopkins. Global COVID-19 cases increased 5,661,128, down more than 7 million each of the past three weeks, reaching 592,131,424 by Aug. 16.

Roughly 78.9% of the U.S. population, or 261,981,618, have received at least one dose of a COVID-19 vaccine, as of Aug. 10, the CDC reported. Fully vaccinated people total 223,457,170, or 67.3%, of America’s population, according to the CDC. The United States also has given at least one COVID-19 booster vaccine to 107.9 million people.

The six socially responsible ways to invest in fertilizer offer an alternative path to profit in the face of Russia’s continuing assault on Ukraine’s pre-war economic strength in the agricultural arena. The ESG trend is expected to keep rising in the years ahead, despite the highest inflation in 42 years, consecutive 0.75% Fed rate hikes in June and July and potentially other rate increases in the months ahead to control U.S. consumer prices that jumped 8.5% and producer prices that climbed 9.8% in the past 12 months.

Paul Dykewicz, www.pauldykewicz.com, is an accomplished, award-winning journalist who has written for Dow Jones, the Wall Street JournalInvestor’s Business DailyUSA Today, the Journal of Commerce, Seeking Alpha, GuruFocus and other publications and websites. Paul, who can be followed on Twitter @PaulDykewicz, is the editor of StockInvestor.com and DividendInvestor.com, a writer for both websites and a columnist. He further is editorial director of Eagle Financial Publications in Washington, D.C., where he edits monthly investment newsletters, time-sensitive trading alerts, free e-letters and other investment reports. Paul previously served as business editor of Baltimore’s Daily Record newspaper. Paul also is the author of an inspirational book, “Holy Smokes! Golden Guidance from Notre Dame’s Championship Chaplain,” with a foreword by former national championship-winning football coach Lou Holtz. The book is great as a gift and is endorsed by Joe Montana, Joe Theismann, Ara Parseghian, “Rocket” Ismail, Reggie Brooks, Dick Vitale and many othersCall 202-677-4457 for multiple-book pricing.

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