Thursday, November 26, 2015
I turn dials and fiddle with knobs to hone in on harmonic rotations
Joined Oct 26, 2011
2,139 Blog Posts

Are Farmers Investing For A Bumper Crop?

The agriculture chemical sector grabbed my interest this week.  The sector saw a modest improvement in its hybrid scoring last week and the charts are set up well.  Also, I’m looking to build a few themes going into 2013, and I like the story in farming.  We had quite the scare last summer with farmers across the breadbasket reporting low yields.  The media ran the story hard, possibly because they saw it as a piece to advance their global warming agenda, possibly because it created buzz and sold advertisements.  There’s no question it pumped up (artificially?) corn and wheat prices.  I’m sure you remember, but check out the respective corn and wheat price charts, via finviz:

If farmers had even average yields, and didn’t hedge down their profits too much, they were able to take their products to market at higher prices, and could be sitting on cash piles.  Irrigation systems are a possible investment, but an easier investment for a farmer is a beefed up nutrient and genetic regiment.

With that story in mind, I also like the sectors seasonality, which according to The PPT, has better than a 60% chance of increased prices in both January and February.  If I’m building a theme going into the New Year, I want something that will hit the ground running.

Before taking to the charts, I wanted to compare a few key fundamental statistics:

My takeaway from the above data is that Monsanto (MON) appear to be you innovator.  They’re the only company pumping a serious R&D budget.  Potash Corporation (POT) although having the lowest beta, is the highest risk stock with the worse cash position.  They need demand to come in, or they could be in trouble.  However, POT has the highest ROE, and although I didn’t do any risk adjustments, any such adjustments would only solidify their ROE out performance considering their beta.

I didn’t put the dividend yield stats on my chart, but POT currently has the highest yield.  I see the yield as a risk.  With their low cash position, they may be pressed to reduce the dividend.  This could affect share price.

Year-to-date, it appears much of the negative news could be baked into the share price of POT, they’re had an abysmal performance this year.  There could certainly be an element of “catch-up” built into the name.

Taking to my precious, the charts, we can see big time innovator MON flirting with annual highs, threatening another big breakout.  Also, both MOS and POT are sitting on key support levels.  Should we see strength in these names, both names have room for us to scale some profits well before swing highs, allowing us to book some gains which would reduce our cost basis should we choose to swing the names for multiple months:

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  1. Nice use of the CCI – affirms strength in MON and MOS, but not so strong in POT, probably for the reasons you mentioned.

  2. Good work. I like $CF as a good trade in seasality too. Currently hybrid oversold with good fundamentals.

  3. I like the MOS chart the best.