Bridgewater Associates founder Ray Dalio bought his first stakes in two fertilizer companies, Agrium (NYSE:AGU) and Potash (NYSE:POT) of Saskatchewan besides increasing his holdings in another fertilizer company Mosaic by a significant 52% in the last quarter. Bridgewater Associates, which manages more than $165 billion worth of assets, is the largest hedge fund anywhere in the world.
We will walk you through each of this fertilizer companies to show how they are sound investments, namely because their managements are discussing a recovery in business fundamentals, they have strong dividend yields and reasonable valuations.
Potash Corp of Saskatchewan is the largest integrated fertilizer manufacturer in terms of capacity. It owns and runs five potash mines in Saskatchewan as well as one in New Brunswick. Posh Corp has a forward dividend yield of 4.10% and it is currently trading at a forward P/E of 16.54. According to an internal forecast, the company predicts its EPS in the current financial year to be $2.08 and the same for the upcoming financial year to be $2.24.
Eight of the 31 analysts covering Potash Corp recommend that you should buy stocks in the company, while 20 have hold ratings and just three have sell ratings. Company president Jochen Tilk recently spoke about Potash’s strong market fundamentals leading it to an impressive performance in the last quarter of last year. Its sales volumes and price realizations both exceeded expectations.
Its management has given an EPS guidance of $1.90 to $2.20 for the upcoming financial year, which suggests that it expects even better margins and costs. It has also announced its plan to raise dividends, reflecting their intent to return capital back to shareholders as well as a general sense of optimism about the health of the business. A decline in spending as well as a potential increase in earnings means that Potash Corn of Saskatchewan is an option worth keeping an eye on.
Mosaic Co (NYSE:MOS)
The Mosaic Company is the fourth-largest producer of Potash, and is the world’s largest manufacturer of phosphate. It is currently trading at a forward P/E of 13.50 and offered a dividend yield of 1.90%. Eight of the 24 analysts that are covering the company have positive buy recommendations, while 14 have hold recommendations and two have a sell ratings.
In the last quarter, Mosaic reported a three-fold increase in EPS as compared to last year, now at a solid $0.97 per share. Its revenues were also up 9% as compared to the last quarter of 2013. Mosaic CEO James T. Prokopanko said the company’s growth was due to good execution and growing demand for its products. He said the company is optimistic about strong demand in the upcoming financial year. Vincent Andrews, a Morgan Stanley analyst, has upgraded Mosaic’s rating to overweight from equal weight.
Agrium is a large manufacturer and retailer of fertilizers. Its business plan includes spanning the crop input value chain since it produces and distributes seeds, crop protection products, services and nutrients to farmers. The company is currently trading at 14.31 time and has a dividend yield of 2.90%. Its EPS forecast for the current financial year is $5.61, while it is $7.59 for the upcoming financial year.
Estimates predict that Agrium’s top line will grow 3.90% in the current financial year, and 5.10% in the upcoming one. 14 of the 29 analysts currently covering Agrium have buy ratings, while 14 have hold recommendations and one has a sell rating. The company just recently increased target dividend payout ratio from 25-35% to anywhere between 40% and 50% of its free cash flow. Agrium also intends to buy back as much as 5% of its ordinary shares in 2015. The company’s president Chuck Magro has said he aims to increase dividend payouts as free cash flows continue to rise, while also stressing on the importance of a higher payout ratio.
These three companies are performing well and are seemingly trading at a higher price than the average Bridgewater Associates’ buying price. Even still, reasonable valuations, good dividend yields and a general bullishness in the fertilizer industry make them investments worth considering.
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