Van Eck Associates' Top 7 Buys

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 |  Includes: ABX, ADM, GG, MON, MOS, NEM, POT
by: The Analyst Hub

Van Eck Associates Corporation is a New York, NY-based investment advisory and hedge fund firm founded in 1955. The firm manages $29 Billion in equity assets in the Market Vectors series of funds and caters to investment firms, and pension and profit sharing plans.

Investment Strategy: Van Eck Associates Corporation specializes in hard assets, as well as in emerging markets and gold sectors. The firm primarily employs a fundamental, value-oriented approach in making its core investments. For the emerging markets investments, Van Eck focuses on secular growth trends, including domestic consumptions, which significantly affect the economic performance of emerging markets. Investments are typically placed in small- and mid-cap stocks. For its gold investments, the firm uses a flexible, top-down approach in targeting mining companies with favorable reserves and production levels.

The following is a list of its top buys by market value in the last quarter, as released in its most recent 13F filing with the SEC.

Stock

Symbol

Shares Held - 03/31/2011

Shares Held - 06/30/2011

Newmont Mining Corp.

NEM

13,993,375

17,627,708

Goldcorp Inc.

GG

20,841,068

24,313,884

Potash Corp. of Saskatchewan, Inc.

POT

8,345,865

11,112,444

Mosaic Co.

MOS

3,829,312

5,911,546

Archer Daniels Midland Company

ADM

4,683,212

9,312,399

Barrick Gold Corporation

ABX

20,610,381

23,344,692

Monsanto Co.

MON

4,383,510

6,069,642

Click to enlarge

My favorites among the above stocks are Mosaic and Potash Corp. I would recommend buying them inspite of the broader macro concerns. The Mosaic Company is a producer and marketer of concentrated phosphate and potash crop nutrients for the global agriculture industry. Potash Corp. produces nitrogen based fertilizers also in addition to potash and phosphate fertilizers.

During the last downturn in 2008, excess inventory in the supply chain, coupled with anticipation of decline in fertilizer prices by farmers, caused fertilizer producers and retailers to take a hit. However, the present situation is different. Due to the hit fertilizer retailers had taken in 2008, they were cautious this time and have not overstocked fertilizer inventories.

Thus, the supply chain remains very tight. Furthermore, grain prices corrected very sharply along with other commodities during the last downturn. Thus, farmers anticipated that fertilizer prices will come down as well. I don't see a similar commodity correction this time given the excess amount of money supply which has entered the system thanks to bailouts, quantitative easing and stimulus. In particular, when we talk of food grains where demand is inelastic, the trend is likely headed up in the mid-long term, even if we consider a prolonged recession scenario. Fertilizer prices are usually correlated with food prices and I believe fertilizer companies, like Mosaic and Potash, are the best bet in the long term to hedge one's portfolio against inflation in these uncertain times.

In addition to the above fertilizers stocks, Monsanto is also a good buy in the current uncertain environment, given the defensive nature of seeds, prospects for double-digit earnings growth and a reasonable valuation. Monsanto is trading at 20x FY12 (Aug) EPS and has a dividend yield of 1.8%. I see limited downside risk to earnings given growth prospects in biotech seeds and low sensitivity to the economic cycle.

For other stocks in the above list, here are some of the specifics about these companies, including a brief description of their businesses, growth expectations (top line and bottom line):

  • Newmont Mining Corporation is a gold producer. Newmont's EPS forecast for the current year is $4.65 and next year is $4.98. According to consensus estimates, its top line is expected to grow 9.80% in the current year and 6.00% next year.
  • Goldcorp Inc. a gold producer engaged in the operation, exploration, development and acquisition of precious metal properties in Canada, the United States, Mexico and Central and South America. Goldcorp's EPS forecast for the current year is $2.11 and next year is $2.78. According to consensus estimates, its top line is expected to grow 41.60% in the current year and 20.90% next year.
  • Archer Daniels Midland Company is principally engaged in procuring, transporting, storing, processing, and merchandising agricultural commodities and products. Archer Daniels' EPS forecast for the current year is $3.12 and next year is $3.40. According to consensus estimates, its top line is expected to grow 4.90% in the current year and 1.90% next year.
  • Barrick Gold Corporation is engaged in the production and sale of gold, as well as related activities, such as exploration and mine development. It also produces copper, and hold interests in oil and gas properties located in Canada through its oil and gas subsidiary, Barrick Energy. Barrick's EPS forecast for the current year is $4.61 and next year is $5.11. According to consensus estimates, its top line is expected to grow 26.40% in the current year and 10.20% next year.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.