Nov 18, 2021

It's the hottest agriculture market in a decade but the fertilizers and agribusiness companies are still cheap. - Zacks (5:40) - Tracey’s Top Stock Picks (24:00) - Episode Roundup: CF, MOS, IPI, NTR, ANDE Welcome to Episode #259 of the Value Investor Podcast. Every week, Tracey Ryniec, the editor of Zacks Value Investor portfolio , shares some of her top value investing tips and stock picks. 2021 has been a good year for value investors as some of the hottest industries this year are in the “value” category, including energy, banks and agriculture. Tracey expects these industries to still be hot in 2022. The Street has “found” energy stocks this year, as it gets media coverage. But agriculture is not getting any coverage at all despite a huge rise expected in earnings. Agriculture stocks can be in the food area, the equipment makers, in fertilizers or in agribusiness. The fertilizers and agribusiness companies, such as CF Industries, Mosaic, Intrepid Potash, Nutrien and The Andersons, have great Zacks Ranks and are still cheap. Why are they expected to be in a bull in 2022? 5 Stocks for the 2022 Agriculture Bull Market 1. CF Industries CF CF Industries is the world’s largest producer of ammonia. With nitrogen fertilizer prices soaring, so are CF Industries’ earnings. In 2021, CF Industries is expected to make $3.25. But CF Industries’ Zacks Consensus Estimate for 2022 has jumped to $9.70, which is a gain of 198.3%. Shares have also soared this year, jumping 71%. But CF Industries’ valuation still remains attractive, with a forward P/E of 20. CF Industries is also shareholder friendly, with a dividend currently yielding 1.8%. Fertilizer prices are remaining elevated heading into 2022. Look for buying opportunities on any pullback. 2. The Mosaic Company MOS Mosaic is one of the largest fertilizer companies in the world, focusing on potash and phosphates. Mosaic is bullish heading into 2022. In a Nov 11 update on sales volumes for October 2021, Mosaic said that beyond the fourth quarter, it was seeing strong demand for nutrients, having already committed and priced 40% of the phosphate segment’s expected sales volumes for the first quarter of 2022. It’s no surprise, then, that Mosaic’s earnings estimates are on the rise. It’s expected to make $5.10 in 2021 but the Zacks Consensus Estimate for 2022 is at $7.54, up 47.8% year-over-year. However, over the last month, shares of Mosaic have fallen 11.3%. Mosaic is the cheapest fertilizer stock, with a forward P/E of 7.3. Is Mosaic a buying opportunity right now? 3. Intrepid Potash IPI Intrepid Potash produces potassium, magnesium, sulfur, salt and water for the agriculture, animal feed and the oil & gas industries. It’s a small cap company with a market cap of $575.9 million. While Intrepid Potash has an agriculture business, it’s the only company of the five which also has business in the hot oil & gas industry. Intrepid Potash saw big free cash flow in the third quarter, even though historically it’s the slowest free cash flow quarter. Intrepid Potash currently has $26 million in cash on hand. Shares have soared 78% year-to-date but are still attractively priced. Intrepid Potash has a forward P/E of 19.3 and earnings are expected to jump to $5.23 in 2022 from $2.20 this year. Investors looking for a small cap agriculture play, should keep Intrepid Potash on their short list. Nutrien is one of the largest fertilizer and agribusiness companies in the world with a market cap of $38 billion. It produces all three of the major fertilizers and also operates a retail business, Nutrien Ag Solutions, which did double digit revenue growth in the third quarter of 2021. Nutrien recently reported record Q3 earnings. Over the first three quarters of the year, Nutrien also saw record free cash flow of $2.8 billion. Over the next 6 months, Nutrien expects to reduce its long-term debt by $2 billion and is also repurchasing shares. Nutrien is expected to make $5.62 in 2021, but the 2022 Zacks Consensus Estimate is forecast to rise another 35% to $7.61. Because the earnings continue to rise, Nutrien has a forward P/E of just 12. Tracey owns shares of Nutrien in her own personal portfolio and in Zacks Value Investor portfolio. Nutrien shares have fallen 4.9% over the last month. Is it a buying opportunity? 5. The Andersons ANDE The Andersons is an agribusiness company based in Ohio that operates in three segments: Trade, Ethanol and Plant Nutrients. In the third quarter, Trade, which owns and operates 70 grain terminals in the US and Canada which stores corn, soybeans, wheat and other commodities, had all-time record earnings. The Andersons also has strong free cash flow and has reduced long-term debt by $300 million this year. But The Andersons also pays a dividend, currently yielding 1.9%. Shares of The Andersons have soared 50% year-to-date but have fallen off recent highs. The Andersons is still cheap, with a forward P/E of just 13.3. Value investors looking for a small cap company on the agribusiness side, should keep The Andersons on their short list. Tune Into This Week’s Podcast What else should you know about buying cheap agriculture stocks for 2022? Tune into this week’s podcast to find out. Infrastructure Stock Boom to Sweep America A massive push to rebuild the crumbling U.S. infrastructure will soon be underway. It’s bipartisan, urgent, and inevitable. Trillions will be spent. Fortunes will be made. The only question is “Will you get into the right stocks early when their growth potential is greatest?” Zacks has released a Special Report to help you do just that, and today it’s free. Discover 7 special companies that look to gain the most from construction and repair to roads, bridges, and buildings, plus cargo hauling and energy transformation on an almost unimaginable scale.