An Industry That’s Booming in This
Economy? Bet You Can’t Think of It
Friday, August 26th, 2011
By Mitchell Clark, B.Comm. for Profit Confidential
It’s difficult in this economy to come across businesses that are not just doing well, but also doing really well at a time when traditional industry and the services sector are slow. Yet, they’re out there and it’s only because most people don’t see the products that they don’t notice.
As we all know, we’re in a rising commodity price cycle. It started with oil, moved to precious metals and is now at the cusp of a major new price trend in agriculture. The weather’s been hard on crops this year and demand for cash crops is rising along with incomes in developing countries. Add in cheap money, a weaker U.S. dollar and a finite amount of productive land and it’s pretty easy to see that the agricultural economy is about to experience another boom.
Because the vast majority of people don’t see farming and agriculture in their daily lives, they don’t think of it as a stock market sector in which to invest. Yet, some of the best agriculture-related businesses are now generating record financial results—that’s right, record financial results in an economy that’s in the doldrums.
Consider for a moment a company called Potash Corporation of Saskatchewan Inc. (NYSE/POT). This company is the world’s largest fertilizer company by capacity and produces the three main nutrients needed to make fertilizer for farmers: potash, nitrogen and phosphate. In this economy, it’s difficult to imagine a business that’s booming, but this one is. The company just announced record second-quarter profits of $840 million (up from $480 million in the same quarter last year), while revenues grew enormously to $2.33 billion, up almost a full billion from revenues of $1.44 billion in the comparative quarter last year.
The company experienced higher prices for all three of its nutrient products, as well as higher demand. That’s the best of both worlds for an enterprise. Third-quarter net income per share is expected to be between $0.80 and $1.00. Potash Corporation recently increased its full-year earnings guidance to between $3.40 and $3.80 per share. Other companies within the industry are also generating record financial results and raising guidance.
Owning gold has been an obvious trade for a number of years now. While the spot price of gold is likely to correct, its long-term trend seems intact, as governments keep trying to re-inflate their economies. Now the commodity price cycle is migrating into the agricultural sector, which, along with mining, is going to experience a renaissance, likely for the rest of this decade. Accordingly, it’s a stock market sector that’s worth looking into.
Next Post: Global Economies: Why theSlowing’s a Red Flag
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This Is a Confidence Crisis
Tags: agricultural sector, agriculture, commodity price cycle, economic news, gold, Potash Corporation of Saskatchewan, stock market, U.S. dollar
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Mitchell is a Senior Editor at Lombardi Financial specializing in small-cap stocks. He’s the editor of a variety of popular Lombardi Financial newsletters, such as Penny Stock Reporter, Micro-Cap Stocks, and Monster Profits. Mitchell, who has been with Lombardi Financial for thirteen years, won the Jack Madden Prize in economic history and is a long-time student of equity markets. Prior to joining Lombardi, Mitchell was as a stock broker for a large investment bank. While Mitchell is not working he enjoys fly fishing, motorcycling and tending to his hobby farm.
