Tickers in this Article: AGU, TRA, CF, MOS, PG, K
Sometimes boring is good. Actually, when it comes to investing, boring can be great; and when it comes to investing during economic recessions, boring can be very valuable. Such is the case with the fertilizer industry today.

Very few people realize that fertilizer is a product with no substitute, and this is an unbelievable competitive advantage. Even oil, which will always be of enormous value to society, has possible substitutes, such as natural gas and ethanol. Fertilizer, however, has none. As a deep value investor, trained by the teachings of Ben Graham, Warren Buffett and Seth Klarman, I have become very interested in fertilizer for this one reason.

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Sow the Seeds Today
Regardless of how bad the economy gets, people will eat. And whether you buy name brand products from Procter and Gamble (NYSE:PG) or Kellogg (NYSE:K), or generic, all crops are grown using fertilizer. Fertilizer is the most basic input in the food production cycle. Not only that, but farmers are well aware that the use of fertilizer pays for itself several times over in terms of additional crop yields. However, farmers are human, and like the rest of us, they were frightened by the rapid market deterioration in 2008. In response, they curtailed fertilizer purchases due to a decline in commodity prices. Don't expect this curtailment to last long. (For more, see 22 Ways To Fight Rising Food Prices.)

Numbers Don't Lie
The world's population continues to grow, which mean more mouths to feed, and this is most important in India and China. The middle class in China is expected to grow from 130 million to 690 million by 2025; this is a middle class that will want to eat better quality foods and more meats. In addition, world grain stocks continue to fall behind an acceptable level of reserves, leaving the industry at the mercy of any supply/demand disruptions.

Fertile Long-Term Profits
All of the above factors make me very excited about the future of the fertilizer industry, and Mosaic (NYSE:MOS) is one of the industry's best. Currently, 49% of the company's business mix is potash sales, the most profitable fertilizer among the main three (nitrogen, phosphate and potash). The remaining 51% of its business is phosphate, of which Mosaic holds 15% of the global market share and 59% of the North American market share.

Mosaic and its chief competitors, including Agrium (NYSE:AGU) and CF Industries (NYSE:CF), all seem to be excellent values, trading at P/Es of less than seven times earnings. With the competitive advantages of the fertilizer business, all these names should reward investors very well in the next few years. In fact, Agrium, CF, and Terra Industries (NYSE:TRA) are all involved in a takeover battle, another sign that these businesses are in a race to increase capacity by cheaply buying assets today. (For more, see The Basics Of Mergers And Aquisitions.)

Bottom Line
Mosaic, with its strong market position and heavy emphasis on the most profitable fertilizer - potash - looks most appealing. At the current share price of $45, you are paying 6.6 times earnings for net margins of 25%, a return on equity of 45%, and a no net debt. When combining figures like this with the underlying industry trends mentioned above, it seems that now could be a good time to add fertilizer stocks to your portfolio. (For more, see Are Fertilizer Stocks Losing Their Stink?)

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