Five Agrochemical Stocks Hedge Funds Like

In DowDuPont Inc (NYSE:DWDP), there were 82 funds long the stock at the end of 2017, up by 10 funds over the quarter. Since the beginning of the year, DowDuPont Inc (NYSE:DWDP)’s stock is down by 8%, taking a dive at the beginning of February following the release of fourth-quarter earnings, even though the company posted both revenue and EPS figures above the consensus estimates. In addition, DowDuPont Inc (NYSE:DWDP) reported annual cost synergy run-rate of more than $800 million and $200 million of realized savings, and raised its cost synergy commitment to $3.30 billion from $3.0 billion. Later in February, DowDuPont Inc (NYSE:DWDP) announced the new brand names for the three independent companies it plans to create. The specialty products division will become the new DuPont, while the materials science will be called Dow. The agriculture company, as we have mentioned earlier, will be named Corteva Agriscience. DowDuPont Inc (NYSE:DWDP) plans to complete the spin-off of the materials science division by the end of March 2019, while agriculture and specialty products segments are expected to be separated by June 1, 2019. DowDuPont Inc (NYSE:DWDP) might also be affected by the recent tariffs that China has launched as a response to a similar move made by the United States. The tariffs affect many agricultural products, including soybeans, which are the top US agricultural export to China. Soybean seeds and chemicals for the protection of soybean crops are among  DowDuPont Inc (NYSE:DWDP)’s product lines.

Then there’s Monsanto Company (NYSE:MON), which saw the number of investors from our database long its stock decline by eight to 72 during the fourth quarter. Earlier this month, Monsanto Company (NYSE:MON) reported its financial results for the fiscal second quarter. Both EPS of $3.22 and Revenue of $5.02 billion, missed the consensus estimates by $0.09 and $320 million, respectively, due to lower volumes and prices for corn. The company said that its Seeds and Genomics sales inched down by 2.3% on the year to $4.09 billion, significantly lower than analyst expectations of $4.32 billion, with corn seeds and traits sales falling by 6.2% to $2.72 billion, but sales of soybean seeds and traits increased by 6% to $912 million. Lower corn sales were offset by improved prices of glyphosate, a broad-spectrum herbicide. Mosanto Company (NYSE:MON) expects revenue growth to come from higher glyphosate pricing this year and the adoption of new technologies in Seeds and Genomics. Mosanto Company (NYSE:MON) is currently in the process of being acquired by Bayer and recently the US Justice Department gave the permission for the $62.5 billion deal that has been in the works since 2016. The approval from the DoJ is the last big hurdle for the merger and follows the approval from the European Union that companies secured in March. In its second-quarter report, Monsanto Company (NYSE:MON) said it expects the deal to close in the second calendar quarter of 2018.

There also are 35 funds tracked by Insider Monkey bullish on FMC Corp (NYSE:FMC) as of the end of 2017, down from 46 funds a quarter earlier. As a large chemical company, FMC Corp (NYSE:FMC) has a division for crop protection, which a year ago it expanded by acquiring a portion of DuPont’s Crop Protection business that the latter had to divest in order to comply with the European Commission’s ruling regarding the merger between DuPont and Dow Chemical. FMC Corp (NYSE:FMC) is one of the top global crop protection companies with a broad portfolio of Insecticides, Herbicides, Fungicide, and other products, and almost $4.0 billion in annual revenue. At the end of March, FMC Corp (NYSE:FMC) said it expects first-quarter and full-year adjusted EPS to exceed the high end of its guidance ranges of $1.45 to $1.59 and $5.20 to $5.60, respectively. The results are expected to be driven by stronger earnings in both Agricultural Solutions and FMC Lithium segments. Earlier this year, the company announced plans to spin-off its lithium business in order to focus on its core agriculture segment. As part of the spin-off, FMC Corp (NYSE:FMC) plans to conduct a $500 million IPO of a 15% stake in the lithium company. The new company would allow investors to get exposure to a pure-play lithium company that should thrive as the demand for electric vehicles is soaring.

At the end of 2017, 31 funds were long CF Industries Holdings, Inc. (NYSE:CF), compared to 32 funds at the end of September. CF Industries Holdings, Inc. (NYSE:CF)’s stock is 11% in the red, year-to-date, amid analysts expressing concerns about the global fertilizer market. In January, Credit Suisse reiterated a cautious view of the market, saying that the market will be driven by supply this year, which could result in volatile pricing. However, analysts at Credit Suisse also believe that CF Industries Holdings, Inc. (NYSE:CF) should see solid cash margins generated at its fertilizer segment due to its cost-advantaged position. In March, Citigroup downgraded CF Industries Holdings, Inc. (NYSE:CF)’s stock to ‘Neutral’ from ‘Buy’ and cut the price target to $45 from $47, citing the strong performance of the stock over the past year and saying that the stock might not continue the same outperformance given falling urea prices. However, in the long-run, Citi analysts expect to see favorable trends as urea supply growth could be below demand growth in the next couple of years. Also in March, Bank of America Merrill Lunch analysts downgraded the stock to ‘Underperform’ from ‘Buy’ and slashed the price target to $48 from $40, citing potential declines in demand for nitrogen fertilizer due to higher production rates of fertilizer in China. On the other hand, Cowen analysts upgraded fertilizer stocks, including CF Industries Holdings, Inc. (NYSE:CF) and Mosaic Co (NYSE:MOS) to ‘Outperform’ from ‘Market Perform’ and raised the price targets to $50 and $32, respectively, citing crop shortfalls in South America that might help fertilizer prices recover.

Even though Mosaic Co (NYSE:MOS) is the least popular stock among those covered in this article, it saw the second-highest increase in the number of bullish investors during the fourth quarter. At the end of 2017, there were 27 funds holding shares of Mosaic, up by five funds over the quarter. Moreover, during 2017, the number of investors with long positions in the company went up by 11, the largest increase among agrochemical companies. In addition to Cowen analysts that upgraded the stock in March, JP Morgan upgraded the stock to ‘Overweight’ from ‘Neutral’ and raised the price target to $30 from $26 in February. JP Morgan analysts believe that Mosaic Co (NYSE:MOS)’s reduction of phosphate production in the US and low inventories in India might create positive sector fundamentals. In addition, Mosaic Co (NYSE:MOS) delivered a strong fourth quarter, with EPS of $0.34 beating the consensus estimate of $0.29, while revenue of $2.09 billion went up by 12.4% on the year and was $180 million higher than expected.

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