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In this article, via an analysis based on the latest available Q4 institutional 13-F filings, we identify the agriculture and agricultural chemicals (AgChem) group companies that are being accumulated and those being distributed by the world's largest fund managers, managing between $50 billion and over $700 billion in 13-F assets.

Taken together these mega fund managers control over 35% of the assets invested in the U.S. equity markets, but number just over 30 out of the tens of thousands of funds that invest in the U.S. equity markets. Also, taken together, they are bearish on the agriculture and AgChem group, cutting a net $2.81 billion in Q4 from their $58.56 billion prior quarter position (for more general information on these mega funds, please look at the end of the article).

The following are the Agriculture and AgChem group companies that these mega fund managers are most bullish about (see Table):

Agrium Inc. (AGU): AGU manufactures nitrogen, potash, and phosphate-based fertilizers and other agricultural products for markets worldwide, and it is also involved in the retail supply of agricultural products and services in North and South America. Mega funds together added a net $191 million in Q4 to their $1.52 billion prior quarter position in the company, and taken together mega funds hold 12.8% of the outstanding shares. The top buyers were AllianceBernstein ($190 million) and Wellington Management ($85 million), and the top holders were Royal Bank of Canada ($415 million) and Wellington Management ($347 million).

Fertilizer stocks such as AGU are enjoying a boom lately, with shares trading near all-time highs and up nearly 30% YTD. In the most recent Q4, the company reported stellar numbers, beating earnings ($2.34 v/s $2.00) and revenue estimates ($3.18 billion v/s $3.04 billion). Its shares currently trade at 9-10 forward P/E and 2.1 P/B compared to averages of 12.8 and 3.9 for its peers in the fertilizer group, while earnings are expected to fall from $9.62 in 2011 to $9.03 in 2013.

Archer Daniels Midland (ADM): ADM is a world leader in the procurement, transportation, storage, processing and merchandising of agricultural commodities and products, both in the U.S. and internationally. Mega funds together added a net $30 million in Q4 to their $4.98 billion prior quarter position in the company, and taken together mega funds hold 24.2% of the outstanding shares. The top buyer was State Street Corp. ($38 million), and the top holders were State Street ($924 million) and Vanguard Group ($919 million). ADM shares are up a modest 7% YTD, trading at 10 forward P/E and 1.1 P/B compared to averages of 12.8 and 1.8 for its peers in the agricultural products group, while earnings are projected to be nearly flat from $3.07 in 2011 to $3.10 in 2013.

CNH Global NV (CNH): CNH is a Netherlands-based global manufacturer of backhoe/skid steer loaders and tractors for the agricultural and construction markets. It is the number one manufacturer of agricultural tractors and combines in the world, the third largest maker of construction equipment, and has one of the industry's largest equipment finance operations. Mega funds together added a net $18 million in Q4 to their $164 million prior quarter position in the company, and taken together mega funds hold 1.9% of the outstanding shares. The top buyer was JPMorgan Chase & Co. ($16 million), and the top holders were Fidelity Investments ($36 million) and Blackrock Institutional Trust Co. ($27 million).

CNH shares have been trending down ever since the company reported its Q4 at the end of January in which it beat revenue and earnings, and guided FY 2012 revenues in-line. Its shares currently trade at 8-9 forward P/E and 1.2 P/B compared to averages of 11.7 and 2.0 for its peers in the farm machinery group, while earnings are projected to be up from $3.83 in 2011 to $4.65 in 2012 at an annual growth rate of 10.2%. Among its peers, Deere & Co. (DE) trades at 9-10 forward P/E and 4.6 P/B, while earnings are projected to grow at 13.4% from $6.63 in 2011 to $8.52 in 2013.

Besides these, mega funds based on their Q4 trading activity indicated that they are bearish on the following agriculture and AgChem group stocks (see Table):

  • CF Industries Holdings (CF), a manufacturer of phosphate fertilizers, including urea, ammonia and urea ammonium nitrate in North America, in which mega funds together cut a net $682 million in Q4 from their $5.12 billion prior quarter position in the company;
  • Potash Corporation of Saskatchewan, Inc. (POT), the world's largest integrated fertilizer and related industrial and feed products company by capacity, in which mega funds together cut a net $639 million in Q4 from their $9.28 billion prior quarter position in the company;
  • Mosaic Inc. (MOS), one of the world's leading producers and marketers of concentrated phosphate and potash crop nutrients for the global agriculture industry, in which mega funds together cut a net $562 million in Q4 from their $5.16 billion prior quarter position in the company;
  • Deere & Co. , one of the world's leading producers of agricultural equipment, as well as a leading manufacturer of construction, forestry and commercial and consumer equipment, in which mega funds together cut a net $120 million in Q4 from their $9.44 billion prior quarter position in the company;
  • Monsanto Co (MON), a manufacturer of corn and other crop seeds and crop protection products for growers worldwide, in which mega funds together cut a net $96 million in Q4 from their $13.97 billion prior quarter position in the company;
  • Syngenta AG (SYT), a Switzerland-based manufacturer of crop protection and seed products to improve yield and food quality, in which mega funds together cut a net $74 million in Q4 from their $430 million prior quarter position in the company;
  • Sociedad Quimica Y Minra (SQM), a Chilean producer of specialty fertilizers, iodine, industrial chemicals and other products sold worldwide, in which mega funds together cut a net $56 million in Q4 from their $662 million prior quarter position in the company;
  • Scotts Miracle-gro Co. (SMG), that manufactures lawn and garden products, including fertilizers and plant food, in which mega funds together cut a net $55 million in Q4 from their $753 million prior quarter position in the company;
  • CVR Partners LP (UAN), a manufacturer of nitrogen fertilizers utilizing a petroleum coke gasification process primarily for the agricultural market, in which mega funds together cut a net $31 million in Q4 from their $110 million prior quarter position in the company;
  • Titan Machinery Inc. (TITN), owner and operator of full service agriculture and construction equipment stores in the U.S., in which mega funds together cut a net $10 million in Q4 from their $158 million prior quarter position in the company; and
  • Terra Nitrogen Co. (TNH), a manufacturer of fertilizers, including urea, ammonium nitrate and ammonia, in which mega funds together cut a net $1 million in Q4 from their $110 million prior quarter position in the company.

Table

(click to enlarge)

Credit: Fundamental data in this article were based on SEC filings, Zacks Investment Research, Thomson Reuters and Briefing.com. The information and data is believed to be accurate, but no guarantees or representations are made.

Disclaimer: Material presented here is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities. Before buying or selling any stock you should do your own research and reach your own conclusion. Further, these are our 'opinions' and we may be wrong. We may have positions in securities mentioned in this article. You should take this into consideration before acting on any advice given in this article. If this makes you uncomfortable, then do not listen to our thoughts and opinions. The contents of this article do not take into consideration your individual investment objectives so consult with your own financial adviser before making an investment decision. Investing includes certain risks including loss of principal.

Source: Top Agriculture And AgChem Sector Picks Of The World's Largest Money Managers