Archer Daniels Midland Company (ADM), Deere & Company (DE): There’s Money to Be Made in Food and Agriculture Stocks

Other companies didn’t do as well last year, but could see their fortunes change in the coming years. Fertilizer giant Potash Corp./Saskatchewan (USA) (NYSE:POT) dropped 13% and yields 3.7%. (Its dividend has been hiked 25% this year and some 700% over the past few years.) With its current and forward P/E ratios well below its five-year average, the stock seems appealingly priced. Bulls like its low-cost structure and solid profit margins. Some of its fate is tied to massive developing economies such as China, where growth has slowed, and India, where there is reportedly a potash oversupply. Potash Corp./Saskatchewan (USA) (NYSE:POT) carries a lot more debt than cash, but it’s also generating more than $1 billion in free cash flow annually. Some worry about major fertilizer Brazil’s plans to wean itself off foreign fertilizer, but others doubt that it will succeed anytime soon.

Fellow fertilizer concern CF Industries Holdings, Inc. (NYSE:CF) shed 9%, and looks attractive with its forward P/E ratio below 7. Like Potash Corp./Saskatchewan (USA) (NYSE:POT) and others, the nitrogen and phosphate specialist may be hurt if Brazil stops importing fertilizer, but that’s not likely to happen soon. Meanwhile, some peers may be hurt by changes in India, but CF Industries Holdings, Inc. (NYSE:CF) is better positioned there due to its product and sales mix. It has also been benefiting from low natural gas prices, as that’s used in nitrogen fertilizer. Rising nitrogen prices have helped, too.

The big picture
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The article There’s Money to Be Made in Food and Agriculture Stocks originally appeared on Fool.com is written by Selena Maranjian.

Longtime Fool contributor Selena Maranjian owns shares of JPMorgan Chase. The Motley Fool owns shares of CF Industries Holdings (NYSE:CF) and JPMorgan Chase.

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