Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

3 Sectors for a Rapidly Changing World

|Includes: BHP, BMY, GSK, MOS, NTR, NVS, PBR, PFE, SNY, Teva Pharmaceutical Industries Limited (TEVA), VALE

The potential is strong right now in pharmaceuticals, agriculturals, and infrastructure-related names, says stock analyst and researcher Marc Courtenay. He shares some picks for fundamentally sound companies, and some undervalued stocks.

Kate Stalter: Today, I am speaking with Marc Courtenay of Marc, you are a prolific writer and analyst of a lot of different market topics. You were telling me before we got on this call that you are currently doing some research into some of the pharmaceuticals. Want to say a bit about that?

Marc Courtenay: Yes, Big Pharma has some big investor opportunities that are going on right now, kind of under the radar a little bit. A lot of people have been hearing lately, for instance, that an Israeli-based pharmaceutical named Teva (TEVA) hired away one of Bristol-Myers Squibb’s (BMY) employees and made him their CEO.

The other big topic for Big Pharma in 2012 is a number of their largest revenue brand names are going generic. For instance, Pfizer (PFE)—this came out in November but still a lot of people are thinking about it—Pfizer’s losing its patent on Lipitor. Now Lipitor will be available at half the price of the brand name.

So the theme that I am exploring here is how are some of these big pharmaceutical companies that are going to lose lots of revenue because of these kinds of problems going to replace that revenue. One of the ways they are going to do it in 2012 is through acquisitions. I am kind of identifying some acquirers and some companies that will be takeover targets.

In the meantime, all these names pay wonderful, wonderful dividends. For instance, British-basedGlaxoSmithKline (GSK) pays an almost 5% dividend at its current price. This company is a giant; it has a market capital of $219 billion. It is not very expensive stock; it trades about 12 times forward earnings.

So in a time where people are getting excited by a lot of different themes, I am telling people: First of all, in fact one of my subtitles here is invest in yourself and in the products you are using. I started thinking about how many prescribed medications does the average American take, especially the average American 50 years old and older?

I was pretty surprised at what I found out, and I started talking to some of my colleagues and acquaintances in that age category. Of course, I am only 39, but Jack Benny said that too; so that is a hint that I am a little older than 39.

One of my closest friends, he is 75 almost. He takes about 13 or 14 prescribed drugs per day. A lady that I interviewed just recently who is in her mid 50s takes 18 prescription medications daily for anything from high blood pressure to her fibromyalgia and chronic shoulder pain.

So it an interesting theme. One of the medications I take is made by a French company called Sanofi-Aventis (SNY). But Sanofi-Aventis, like Novartis (NVS), the big Swiss conglomerate, has been kind of shunned by the investment community because they are in Europe. Europe has kind of been in the news a lot in the past year scaring the wallets out of some people.

These companies are still making a lot of money and some of the fear of a Swiss Novartis or a French Sanofi is already baked into the price. So that is another thing that we are focusing on and trying to get people to say, “Look, if you are willing to dip your toes in those waters and realize that Novartis isn’t going away..."

And Sanofi, which is a relatively small company, too, and has a smaller market cap—who knows? Could be a takeover target as well. These are companies that pay lovely dividends, 3.7% to 4%; they will be there and they have lots of cash.

Kate Stalter: Marc, you were speaking a moment ago about focusing in on products that people are going to continue to need. Along those lines, I noticed that you did some writing recently about some of the agricultural and commodity names.

There has been a lot of discussion about the growing world population and increased need for food. Say something about some of the ags that you like right now.

Marc Courtenay: Well, I like ags that have a specific need in the food chain. I call them resource champions, because they are the ones who will provide what is necessary to continue life.

I like some of the ones that have been around a while. I have been focusing on a 59-year-old company that sells it fertilizers primarily to retailers, but markets its products primarily to the people who start that food chain, and their purified phosphoric acid they sell directly to consumers, which, incidentally phosphoric acid is an essential product of the food-growing chain.

I am speaking of Potash Corporation of Saskatchewan (POT), which is the world’s largest producer of the three primary plant nutrients. I am not a great botanist, but that I do know that potash, phosphate, and nitrogen are the three biggies in the plant-growing world.

The worldwide demand for this, Kate, is staggering. Potash alone has a market cap of $37 billion, and I just can’t see somebody like them going away or reducing in revenue. I see them as a revenue engine.

In fact, one of the things that attracted me to them is that over the past three years, its average return on equity has been over 29%, and its current 12-month current return on equity is an impressive 38.3%.A lot of people don’t know this, especially a lot of lay investors, but the return on equity of a company reveals how much profit that a company generates with the money that shareholders have invested.

So if Potash is currently at a return on equity of 38% and you look at its nearest competitor, the Mosaic Company (MOS)—which I also follow, believe in and personally own the shares of that one as well—they have a return on equity of less than 22%. So as an investor as well as a fundamental investor, I get excited by companies like that.

I also get excited about companies that have something to do with the infrastructure theme. I am really thinking of Vale (VALE), which I think is at the very least undervalued.

Vale is like its sister company, although they are not sister companies but they are both Brazilian companies. I was thinking of Petrobras (PBR), the petroleum oil energy giant in Brazil. They are not getting a lot of respect in the investment community.

If you look at Vale, it is selling at about five times current earnings and a forward P/E of 5.6. They just are a huge cash cow. Vale is the very profitable company that is renowned for its production and exploration of strategic minerals and the strategic metals. They also produce metals like silver and copper...they are just amazing.

They are kind of like a somewhat smaller vision of the Australian giant, BHP Billiton (BHP), but they are just a lot cheaper. I think they are well overlooked.

So these are the kind of companies that I call overlooked and lower-risk kind of companies because of their evaluations, their cash and revenue production, but also the fact that whether it is food or whether it is the iron ore necessary to rebuild the world’s bridges and buildings, these are the companies that I think will do very, very well and not getting the kind of respect that they deserve.