This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
$1 buys you full access to ALL of TheStreet's Subscription Services! Learn More

A Fertilizer Stock to Grow Your Portfolio in 2012

Stocks in this article: MOS

Editor's note: As part of our partnership with PBS's Nightly Business Report, TheStreet's Jill Malandrino will appear on NBR Monday (check local listings) to discuss why fertilizer stocks could help your portfolio grow in 2012.

NEW YORK ( TheStreet) -- Commodities are slumping into the end of the year, overshadowed by the European sovereign debt concerns weighing on global growth and lessening demand for raw materials. But as corn enters 2012 with lower stockpiles and resilient demand, there are reasons to be bullish.

Not all commodities are poised to move higher, but there are some bright spots, and that is why I am planting myself in the fertilizer space for 2012, with Mosaic (MOS) as my top pick.

So, what does the rising price of corn mean? Wouldn't higher commodity costs hurt agricultural names? Not in the case of the fertilizer space. This is a true global supply-and-demand story of "stuff" and consumption, and fundamentals have never been better.

Many investors try to draw parallels between the macro concerns that have led to the extreme stock-market volatility of recent weeks and those that were prevalent in 2008, but I believe such comparisons are unwarranted for fertilizer shares.

Word on the Street

The food supply is tight and demand from China and India continues to grow as diets there change -- in fact, India's prime minister said his country is due for a second green revolution. Meanwhile, U.S. ethanol production is at a record high, and poor weather in South America's prevailing growth regions of Brazil and Argentina is further straining supply. Farmers need to satisfy the world's consumption demands, and whether they're growing grain, corn or beans, they need fertilizer to yield the best output.

The fertilizer group as a whole is very inexpensive and we are in the normal seasonal lows, making this a great time to quietly pick up some deals as shares have been beaten up. A big reason for the underperformance is that these stocks tend to track the price of corn, which has been falling throughout the second half of this year. This has created a disconnect between the stocks of farm equipment companies and the shares of the major fertilizer companies.

Many positive outlooks and favorable comments from the equipment makers indicate that the sell-off in fertilizer names may be overdone. For example, Deere (DE) stated in its December investor presentation that it expects the world's population to top 9 billion by 2050, which means agricultural output must double by that time. Furthermore, Deere expects 200 million households to join the middle class in the key regions of China and India. Data points such as population and income growth are critical, since they create a longer-term bid -- and a strong institutional investor base -- for these stocks.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,808.59 -6.35 -0.04%
S&P 500 2,070.53 +3.50 0.17%
NASDAQ 4,781.3310 +23.0790 0.48%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs