Cramer's Mad Money - Agriculture's Busting Out All Over (11/17/09)

by: Miriam Metzinger

Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Tuesday November 17.

Monsanto (NYSE:MON), Terra Nitrogen (NYSE:TNH), Potash (NYSE:POT), Deere (NYSE:DE)

It's the agriculture sector's turn to enjoy a bull market, especially after the Department of Agriculture raised its price projections because of lower-than-expected production. Monsanto's (MON) stock price rose recently from $73 to $77 after management said it expects to double gross profits by 2012. Higher corn prices will also be good for Monsanto, which is a top producer of genetically modified corn seed.

Fertilizer companies Terra Nitrogen (TNH) and Potash (POT) are worth buying on the agriculture trend, especially the latter, which has a 6.4% dividend yield. Deere (DE) is up 28% for the year, but it still has 48% more to reach its high 20 months ago. While Deere has underperformed in the past, Cramer thinks it has a strong future. He predicts more analysts will be bullish on the stock, given the company's increasing revenues from overseas, helped by the weak dollar. Deere's earnings report on November 25 will likely indicate that the construction and forestry divisions have bottomed.

Nordic American Tanker (NYSE:NAT), Diana Shipping (NYSE:DSX)

"Worldwide commerce is coming back," said Cramer, and the best way to play this trend, particularly in connection with the increase of demand in China, is with Diana Shipping (DSX) and Nordic American Tanker (NAT). According to the weekly chart, Diana looks "about to explode," but according to the daily chart, Diana is 21% above its 50 day moving average, and Cramer would let it pull back a bit before buying.

Nordic American Tanker (NAT) had the habit of selling off every time it hit its 50 day moving average until it finally broke through this barrier on high volume trading. A technical analyst has said that Nordic American's 50 day moving average will probably be at the bottom rather than the top of its range. Cramer thinks NAT is a buy because it has "little or no downside risk."

Diana was hurt by plummeting day rates, which fell 150% from 2007 until this week. However, the rates have already risen 30% and Cramer thinks they will continue to increase. Diana's strong balance sheet will allow the company to add 9 ships to its current fleet of 21, and Cramer thinks the company will once again pay its generous dividend, which was suspended in the first quarter.

Nordic American's shipping rates are also increasing. Chinese ports no longer allow single-hull ships, which are considered to be bad for the environment. This is good news for Nordic American, which only uses double-hulled ships. Although NAT cut its dividend, the stock price is still strong; Cramer thinks this is a "major show of strength" and predicts the yield will come "roaring" back. Cramer thinks Diana and Nordic American are both buys.

CEO Interview: Steven Farris, Apache (NYSE:APA)

Cramer reiterated his call to buy natural gas stocks. The commodity has many advantages; it is cleaner than fossil fuels, is abundant and relatively inexpensive. Natural gas stocks are also top performers. Apache (APA), which is 50% natural gas, has risen 51% over the past 3 years and 84% over the past five years. Steven Farris discussed the company's track record of growing production 29 of the past 30 years. New technology is enabling the company to drill in Oklahoma and the North Sea. At this rate, new reserves will give the country 100 years' worth of natural gas.

CEO Interview: Donald Wood, Federal Realty (NYSE:FRT), iShares Dow Jones US Real Estate Index Fund (NYSEARCA:IYR),

“The case for true commercial real estate catastrophe, I think, is totally bogus,” Cramer said. The retail sector would look a lot worse if commercial real estate were going under. However, "money is plentiful" in the sector, and thanks to secondary offerings, occupancy rates are high. He recommends iShares Dow Jones U.S. Real Estate Index Fund (IYR) as "the best way to get broad exposure to real estate investment trusts that have retail properties.”

For more general exposure, Cramer would take a look at Federal Realty (FRT); its occupancy rate is showing lower declines and rentals were even or positive. Rental rates are increasing. Management at Federal Realty says the company is not just stable, it is expanding. No one client provides more than 2.6% of FRT's business. The stock is up 9% since the company's secondary offering in August and FRT offers a 3.9% dividend.

CEO Donald Wood said he is reluctant to give the "all clear" on commercial real estate in troubled areas of the U.S, but in stronger areas, business is "just fine." He thinks that doomsayers in the media are focusing on weaker players in the sector, and says there is a "night and day difference" between weaker names and quality companies. Wood thinks the time to make acquisitions is not here yet, and while Federal Realty lost some business with the bankruptcy of Circuit City and Linens N' Things, the impact was only short-term. Cramer thinks Federal Realty is the stock to buy in the commercial real estate sector.


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