Lombardi: Stock Market Commentary & Forecasts, Financial & Economic Analysis Since 1986

The Under-the-Radar Sector That’s About to Get Hot

Friday, January 27th, 2012
By for Profit Confidential

The Under-the-Radar Sector That’s About to Get HotWe have learned that the Federal Reserve is about to leave interest rates at historically low levels for an unprecedented period of time. They also hinted that adding even more liquidity is certainly an option. As expected, gold, silver and other precious metals took off higher. But is there another way to take advantage of this wall of cheap money? Quite possibly, in the agriculture sector. What I’m talking about is potash.

As money floods the system and we see inflation start to move higher around the world, not only will precious metals move up, but so will a lot of other commodities like food. We’ve seen many commodities come down in late 2011, but it appears they are now set to take off for an extended period of time. Higher food prices mean more people will be farming and existing farmers will want a higher yield, meaning more crops for the same amount of space. To achieve, this they use fertilizers

Fertilizer is made of three main components: nitrogen; phosphorus; and potash. Potash, a product made from natural potassium salts, is essential for plant growth and is in huge demand, but is costly. When the prices of commodities fall, farmers use less fertilizer to reduce costs, since they are getting less money on the market for their crops. But when prices of commodities rise, as they will with higher inflation, then farmers want more crops and can get higher prices, so they are willing to spend more on fertilizers containing the key ingredient potash.

Potash Corp. of Saskatchewan, Inc. (NYSE/POT) just came out with corporate earnings that missed expectations, as investor sentiment was hoping for a better return. This might be a good opportunity to get in ahead of 2012 being better than what current investor sentiment is expecting, if inflation in food prices starts to move higher. This potential move up in food prices will result in more revenue to farmers and better corporate earnings for late 2012 and 2013. If the Fed is going to keep the money supply flowing into late 2014, then we could have a very long period of inflation starting to rise, moving investor sentiment later this year into the camp of higher expectations, which would mean that the prices of potash stocks would also be quite higher.

Other companies to watch in this sector are CF Industries Holdings, Inc. Co (NYSE/CF) and Agrium Inc. (NYSE/AGU). If investor sentiment becomes more positive for potash in general, then all of these firms will have stronger corporate earnings. While they have moved off their lows from last fall, they are still far off from their highs.

While I wouldn’t recommend stepping in immediately, I would pay attention to how their next corporate earnings outlook appears and the guidance issued by the companies. This will drive investor sentiment. A good example is from the last corporate earnings release from The Mosaic Company (NYSE/MOS), in which the company outlined its guidance for 2012. It stated that, in early 2012, they were cautious, but could see a strong second half, with volume starting to build after February.

  • The Two Most Important Pictures Investors Will See This Year

    Within the next 90 days, a new economic catastrophe will be headed our way.

    It will blindside most Americans. And this time, the government and the Federal Reserve will not be able to help.

    It will cause a surge in personal bankruptcies and massive layoffs. It will make the recession of 2008 pale in comparison.

    It will crash retirement plans: I'm talking stocks, bonds, maybe even your own bank account.

    To get a firsthand look at what we're so worried about now, a catastrophe that has already been set in motion, I urge you to...

    See the two most important pictures investors will see this year FREE when you click here.

I am going to be paying close attention to investor sentiment in agricultural prices, as well as these stocks themselves, ahead of the next corporate earnings releases. If we see inflation start to pick up and food prices headed higher, we should see this result in better corporate earnings for this sector later this year.

VN:F [1.9.22_1171]
Rating: 0.0/10 (0 votes cast)
VN:F [1.9.22_1171]
Rating: 0 (from 0 votes)

This is an entirely free service. No credit card required.

We hate spam as much as you do.
Check out our privacy policy.

Sasha Cekerevac - Investment Advisor, Fund AnalyzerSasha Cekerevac, BA Economics with Finance specialization, is a Senior Editor at Lombardi Financial. He worked for CIBC World Markets for several years before moving to a top hedge fund, with assets under management of over $1.0 billion. He has comprehensive knowledge of institutional money flow; how the big funds analyze and execute their trades in the market. With a thorough understanding of both fundamental and technical subjects, Sasha offers a roadmap into how the markets really function and what to look for as an investor. His newsletters provide an experienced perspective on what the big funds are planning and how you can profit from it. He is the editor of several of Lombardi’s popular financial newsletters, including Payload Stocks and Pump & Dump Alert. Add Sasha Cekerevac to your Google+ circles

The Great Crash of 2014

A stock market crash bigger than what happened in 2008 and early 2009 is headed our way.

In fact, we are predicting this crash will be even more devastating than the 1929 crash…

…the ramifications of which will hit the economy and Americans deeper than anything we’ve ever seen.

Our 27-year-old research firm feels so strongly about this, we’ve just produced a video to warn investors called, “The Great Crash of 2014.”

In case you are not familiar with our research work on the stock market:

In late 2001, in the aftermath of 9/11, we told our clients to buy small-cap stocks. They rose about 100% after we made that call.

We were one of the first major advisors to turn bullish on gold.

Throughout 2002, we urged our readers to buy gold stocks; many of which doubled and even tripled in price.

In November of 2007, we started begging our customers to get out of the stock market. Shortly afterwards, it was widely recognized that October 2007 was the top for stocks.

We correctly predicted the crash in the stock market of 2008 and early 2009.

And in March of 2009, we started telling our readers to jump into small caps. The Russell 2000 gained about 175% from when we made that call in 2009 to today.

Many investors will find our next prediction hard to believe until they see all the proof we have to back it up.

Even if you don’t own stocks, what’s about to happen will affect you!

I urge you to be among the first to get our next major prediction.
See it here now in this just-released alarming video.