Aristotle Capital Management, an independent/employee-owned investment management organization, published its “Global Equity Fund” first quarter 2022 investor letter – a copy of which can be downloaded here. For the first quarter of 2022, Aristotle Capital’s Global Equity Composite posted a total U.S. dollar return of -9.19% gross of fees (-9.28% net of fees), compared to the MSCI World Index, which returned -5.15%, and the MSCI ACWI Index, which returned -5.36%. Try to spend some time looking at the fund’s top 5 holdings to be informed about their best picks for 2022.
In its Q1 2022 investor letter, Aristotle Capital Management Global Equity mentioned FMC Corporation (NYSE:FMC) and explained its insights for the company. Founded in 1883, FMC Corporation (NYSE:FMC) is a Philadelphia, Pennsylvania-based chemical manufacturing company with a $15.5 billion market capitalization. FMC Corporation (NYSE:FMC) delivered a 12.06% return since the beginning of the year, while its 12-month returns are up by 5.94%. The stock closed at $123.14 per share on May 26, 2022.
Here is what Aristotle Capital Management Global Equity has to say about FMC Corporation (NYSE:FMC) in its Q1 2022 investor letter:
“FMC is an agricultural sciences company providing solutions for the protection of crops from different pests. Its products are used by farmers to ensure bugs, weeds and fungi do not negatively impact their harvest. Headquartered in Philadelphia, Pennsylvania, the company has a rich history dating back to 1883 when inventor John Bean set out to build a better insecticide spray pump. Over the decades, through acquisitions, FMC became a disparate collection of chemical companies. FMC has transformed itself to solely focus on crop chemicals, having acquired DuPont’s crop chemicals portfolio in 2017, and completed the separation of its lithium business in 2019. FMC is now one of the largest patented crop protection companies globally.
Its presence is balanced both geographically around the world, as well as from a crop exposure standpoint, with soybeans being the largest at roughly 20% of total revenue. In terms of products, FMC’s portfolio skews toward insecticides, which account for over 60% of its revenue. The remainder are herbicides (~25%), as well as fungicides and other crop chemicals (~15%).
High-Quality Business
Some of the quality characteristics we have identified for FMC include:
- Strong portfolio of brands allowing for differentiation outside of price, as many customers refer to the brand name, not the active ingredient;
- Strong competitive position with many products being either protected by patents or niche products, perhaps unlikely to be targeted by generics;
- Oligopolistic industry, as FMC is one of just five companies that collectively contribute the majority of research and development performed on crop protection chemicals; and
- Capable management team with operational experience and ability to commercialize new products.
Attractive Valuation
We believe FMC’s current stock price is offered at a discount to our determination of the company’s intrinsic value given our estimates of both enhanced margins and higher earnings on a normalized basis.
Compelling Catalysts
Catalysts we have identified for FMC, which we believe will cause its stock price to appreciate over our three- to five-year investment horizon, include:
- FMC is poised to benefit from its focus on crop chemicals, as yield gains are needed to support rising food consumption in emerging markets;
- Continued margin improvements from its product pipeline. These new products should be particularly effective against insects, weeds and fungi that have grown resistant to traditional crop chemicals; and
- Further cross-selling of FMC products to DuPont customers. For example, in Argentina, 78% of the customers it gained from the DuPont acquisition were unique to FMC, providing cross-selling opportunities.”
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Our calculations show that FMC Corporation (NYSE:FMC) fell short and didn’t make it on our list of the 30 Most Popular Stocks Among Hedge Funds. FMC Corporation (NYSE:FMC) was in 26 hedge fund portfolios at the end of the first quarter of 2022, compared to 27 funds in the previous quarter. FMC Corporation (NYSE:FMC) delivered a 7.17% return in the past 3 months.
In December 2021, we also shared another hedge fund’s views on FMC Corporation (NYSE:FMC) in another article. You can find other investor letters from hedge funds and prominent investors on our hedge fund investor letters 2022 Q1 page.
Disclosure: None. This article is originally published at Insider Monkey.
