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2010: A Look Back At Agriculture Stocks
What started out as a quiet, boring year for agriculture turned into anything but that. Both farmer and investor were rewarded in 2010 thanks to a surge in agricultural commodities. In addition to corn and wheat, cotton staged an impressive rally in 2010, bestowing some much-needed profitability into many farmers' pockets.
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Merger Mania
The biggest story in agriculture in 2010 was most likely the attempted hostile takeover of Potash (NYSE:POT) by Australia's BHP Billiton (NYSE:BHP). In the second half of the year, BHP announced an unsolicited $130 per share offer for Potash, the world's largest fertilizer company. From day one, both management and investors alike saw this deal as grossly undervalued. Shares in Potash shot up to over $150 when BHP announced its offer. When BHP subsequently withdrew its offer several months later, shares in Potash were still trading over $140. (For more, see Objects Of BHP Billiton's Love.)
A Growing Year
While BHP's interest in Potash may have sparked an initial rally in agricultural stocks, strong recovering fundamentals played the major role in the industry's successful year. Both Mosaic (NYSE:MOS) and CF Industries (NYSE:CF), two of the largest fertilizer companies in the world, are finishing the year in strong fashion. Mosaic shares are up over 15% heading into year end, while CF shares have surged nearly 40%. Thanks to an increase in fertilizer demand, profitability will be very strong in the second half of 2010. After reporting a strong third quarter, Potash upped its EPS guidance for the rest of 2010 and 2011.
The demand for food will likely be higher over the next several years, and that puts pressure on farmers to increase their output. Fertilizer is a necessary part of that equation. BHP's interest in Potash was one very strong signal that the long-term outlook for agriculture looks fertile. (For more, see 5 Things To Know About Potash)
Fertile Years to Come
Agriculture had a growing year in 2010 despite tough economic conditions in the U.S. and other parts of the planet. As the world slowly works its way out of its recessionary hole, 2011 may be the first of many fertile years ahead for agriculture. (For more, see 5 Agriculture Stocks To Grow With.)
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IN PICTURES: 9 Simple Investing Ratios You Need To Know
Merger Mania
The biggest story in agriculture in 2010 was most likely the attempted hostile takeover of Potash (NYSE:POT) by Australia's BHP Billiton (NYSE:BHP). In the second half of the year, BHP announced an unsolicited $130 per share offer for Potash, the world's largest fertilizer company. From day one, both management and investors alike saw this deal as grossly undervalued. Shares in Potash shot up to over $150 when BHP announced its offer. When BHP subsequently withdrew its offer several months later, shares in Potash were still trading over $140. (For more, see Objects Of BHP Billiton's Love.)
While BHP's interest in Potash may have sparked an initial rally in agricultural stocks, strong recovering fundamentals played the major role in the industry's successful year. Both Mosaic (NYSE:MOS) and CF Industries (NYSE:CF), two of the largest fertilizer companies in the world, are finishing the year in strong fashion. Mosaic shares are up over 15% heading into year end, while CF shares have surged nearly 40%. Thanks to an increase in fertilizer demand, profitability will be very strong in the second half of 2010. After reporting a strong third quarter, Potash upped its EPS guidance for the rest of 2010 and 2011.
The demand for food will likely be higher over the next several years, and that puts pressure on farmers to increase their output. Fertilizer is a necessary part of that equation. BHP's interest in Potash was one very strong signal that the long-term outlook for agriculture looks fertile. (For more, see 5 Things To Know About Potash)
Fertile Years to Come
Agriculture had a growing year in 2010 despite tough economic conditions in the U.S. and other parts of the planet. As the world slowly works its way out of its recessionary hole, 2011 may be the first of many fertile years ahead for agriculture. (For more, see 5 Agriculture Stocks To Grow With.)
Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
by
Sham Gad
Sham Gad is the Managing Partner of Gad Partners Fund's, value inspired investment partnerships modeled after the Buffett Partnerships of the 1950's. Previously, Gad ran the Gad Investment Group and delivered annualized returns of 22% from 2002 to 2005. Gad is also the author of "The Business of Value Investing" which will be out in the fall of 2009. Gad earned his MBA at the University of Georgia in May of 2007. Gad runs a value investing blog. He can also be reached by visiting the Gad Partners Funds site. When not writing or analyzing businesses, Gad enjoys hanging out with his wife Maggie, reading, golf, and yoga
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