In this article, we discuss the 5 best fertilizer stocks to buy now. If you want to read our detailed analysis of these stocks, go directly to the 10 Best Fertilizer Stocks To Buy Now.
5. The Scotts Miracle-Gro Company (NYSE:SMG)
Number of Hedge Fund Holders: 30
Wells Fargo analyst Chris Carey recently initiated coverage of The Scotts Miracle-Gro Company (NYSE:SMG) stock with an Overweight rating and a price target of $180, noting that the firm was the largest supplier of hydroponics equipment and supplies in North America and had a stable consumer lawn and garden business. The analyst noted that the hydroponics business had gone from taboo to mainstream on Wall Street in recent years.
In early January, The Scotts Miracle-Gro Company (NYSE:SMG) announced that it would be purchasing Luxx Lighting, a provider of storage for dry plant products, in a deal worth around $215 million. The purchase will add $100 million in sales to the business of The Scotts Miracle-Gro Company (NYSE:SMG) on an annual basis.
Interest around the unique proposition of The Scotts Miracle-Gro Company (NYSE:SMG) in the plant sector has been rising in recent months. Among the hedge funds being tracked by Insider Monkey, Washington-based investment firm Fisher Asset Management is a leading shareholder in The Scotts Miracle-Gro Company (NYSE:SMG) with 713,833 shares worth more than $104 million.
In its Q2 2021 investor letter, Madison Funds, an asset management firm, highlighted a few stocks and The Scotts Miracle-Gro Company (NYSE:SMG) was one of them. Here is what the fund said:
“In Consumer Staples on the other hand, Scott’s Miracle-Gro (SMG) was our worst performing stock, ironically after posting record results. There are a few factors at play here. SMG’s lawncare business benefitted immensely from the lock down and work from home, as homeowners spent more time at home and invested in remodels and upgrades which included their lawn and gardens. Furthermore, the weather was very supportive for lawn and garden season. However, stocks are forward looking vehicles and investors are betting that the best is behind Scott’s and reopening will mean less spending on lawncare. While it’s difficult to argue against a slowdown, we continue to like this dominant franchise for two reasons. First, home ownership has expanded and continues to expand, and second, Scott’s owns the Hawthorne franchise. Hawthorne sells lighting, nutrients and grow media into the fast growing commercial cannabis market. It is the country’s largest and most profitable cannabis supply vendor. Over the last 6 months, laws legalizing recreational marijuana use have passed in several states including New York, Connecticut, South Dakota, and Virginia. Meanwhile the most mature legal states like Colorado and California are still growing rapidly for Hawthorne’s products. The pullback in the stock has been dramatic and excessive, in our opinion. We believe a sum of the parts framework can yield great insight. The Hawthorne business is an effective duopoly with Hydro Farm (HYFM) – also a portfolio company. The market values HYFM at 5x revenue. If we apply the same multiple to Hawthorne’s revenue, this implies that the market leading Scotts’ Miracle-Gro franchise, with greater than 25% Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) margins, is valued at just 5x EBITDA.”
4. Nutrien Ltd. (NYSE:NTR)
Number of Hedge Fund Holders: 30
A global food shortage, in part due to supply chain problems because of the pandemic, and climatic issues have combined to push fertilizer prices, one of the premier products of Nutrien Ltd. (NYSE:NTR), to record highs in the past few months. A ban on fertilizer export in Russia, one of the largest fertilizer producers in the world, has aided in making fertilizers expensive in Europe. Analysts predict the higher prices will lead to lower crop yields and further food shortages in the EU in the coming months.
As countries like China and India also protect their fertilizer production, it is likely that prices in the US will remain high in 2022, benefiting firms like Nutrien Ltd. (NYSE:NTR). The firm, along with Mosaic, controls over 90% of the potash market in the US. It is also a leading producer of nitrogen-based fertilizers.
This is why Nutrien Ltd. (NYSE:NTR) has been a hedge fund favorite for the past few years. At the end of the third quarter of 2021, 30 hedge funds in the database of Insider Monkey held stakes worth $853 million in Nutrien Ltd. (NYSE:NTR), up from 28 in the preceding quarter worth $596 million.
In its Q1 2021 investor letter, Miller/Howard Investments, an asset management firm, highlighted a few stocks and Nutrien Ltd. (NYSE:NTR) was one of them. Here is what the fund said:
“For the most part, performance of the stocks within the Income-Equity Strategies was skewed towards the high-performing market sectors with two exceptions – our consumer discretionary and technology stocks both did better than their broad market peers… We bought Nutrien (NTR), a producer of fertilizer, which we believe should benefit from increasing crop prices.”
3. Bunge Limited (NYSE:BG)
Number of Hedge Fund Holders: 37
Bunge Limited (NYSE:BG) is one of the most stable businesses in the agriculture sector. The firm has paid a dividend to shareholders for 19 consecutive years. In early November, Bunge Limited (NYSE:BG) declared a quarterly dividend of $0.525 per share. The forward yield was 2.27%. In earnings results for the third quarter, Bunge Limited (NYSE:BG) beat market estimates on earnings per share and revenue by $2.30 and $230 million respectively.
BMO Capital analyst Kenneth Zaslow has an Outperform rating on Bunge Limited (NYSE:BG) stock with a price target of $108. Among the hedge funds being tracked by Insider Monkey, New York-based investment firm Candlestick Capital Management is a leading shareholder in Bunge Limited (NYSE:BG) with 1.1 million shares worth more than $94 million.
2. The Mosaic Company (NYSE:MOS)
Number of Hedge Fund Holders: 40
The Mosaic Company (NYSE:MOS) also has a stellar dividend history stretching back a decade. On December 17, The Mosaic Company (NYSE:MOS) raised the quarterly dividend by 50% to $0.1125 per share. The Mosaic Company (NYSE:MOS) markets fertilizers and agricultural chemicals. It was recently named among a group of “resilient” chemicals stocks expected to perform better than peers in 2022 by UBS.
On December 16, The Mosaic Company (NYSE:MOS) reported that it had accumulated a revenue of over $1.2 billion in November, up 71% year-on-year. At the end of the third quarter of 2021, 40 hedge funds in the database of Insider Monkey held stakes worth $912 million in The Mosaic Company (NYSE:MOS), compared to 43 in the preceding quarter worth $808 million.
In its Q1 2021 investor letter, Appleseed Fund, an asset management firm, highlighted a few stocks and The Mosaic Company (NYSE:MOS) was one of them. Here is what the fund said:
“Our most significant contributors to the Fund’s equity performance during the quarter (includes) Mosaic Company (MOS). As for Mosaic, its share price has risen in sympathy with increasing grain prices, which should stimulate additional farmer investment into improving crop yields.”
1. CF Industries Holdings, Inc. (NYSE:CF)
Number of Hedge Fund Holders: 49
Piper Sandler analyst Charles Neivert recently initiated coverage of CF Industries Holdings, Inc. (NYSE:CF) stock with an Overweight rating and a price target of $78, noting that long-term ammonia prices were increasing amid shifts in the fertilizer business. The analyst backed CF Industries Holdings, Inc. (NYSE:CF) to deliver mid-cycle revenues of around $2.5 billion under higher prices. The analyst further noted that 2022 would represent the peak of the earnings cycle for CF Industries Holdings, Inc. (NYSE:CF).
CF Industries Holdings, Inc. (NYSE:CF) has been the favorite hedge fund stock among fertilizer firms in the past few months. At the end of the third quarter of 2021, 49 hedge funds in the database of Insider Monkey held stakes worth $1.2 billion in CF Industries Holdings, Inc. (NYSE:CF), up from 47 in the previous quarter worth $955 million.
You can also take a peek at 10 Stocks Reddit’s WallStreetBets is Buying in July 2021 and Top Robinhood Stocks Popular on Reddit.
