In this article, we discuss the 10 best fertilizer stocks to buy now. If you want to skip our detailed analysis of these stocks, go directly to the 5 Best Fertilizer Stocks To Buy Now.
Fertilizer prices across the world have skyrocketed in recent months amid a production lull from China, an export ban in Russia, and supply chain problems related to the pandemic. Severe storms in the United States that have damaged nitrogen production, an essential part of fertilizer manufacture, have also contributed to this rise. The hike in oil and gas prices has affected the market as well. In December, the Family Farm Action Alliance petitioned the United States Department of Justice to investigate fertilizer companies in relation to the fertilizer price hikes.
Consolidation and Future Trends in Fertilizer Market
The Fertilizer industry has witnessed historic consolidation in the past few decades. Big companies like CF Industries Holdings, Inc. (NYSE:CF), The Mosaic Company (NYSE:MOS), and Nutrien Ltd. (NYSE:NTR) control over 90% of the fertilizer market in the US. Since the 1980s, the total number of fertilizer companies in the North American country has dropped from 46 to merely 13. According to a report by Research and Markets, the global fertilizer industry will grow at a compound annual growth rate of around 4% in the next few years.
Some of the dominant trends expected to shape the market include the growth in the Asia-Pacific region, the decrease in arable land mass against increased demand, and a competitive business landscape. Investors eager to profit from the current boom in the sector, expected to last well into 2022 and beyond, should consider investing in some of the top firms working in the fertilizer business.
Our Methodology
The companies that operate in the fertilizer sector were selected for the list through a careful assessment of business fundamentals and analyst ratings to provide readers with some context for their investment choices.
These stocks are also popular among the 867 elite hedge funds tracked by Insider Monkey. For each stock we have mentioned the number of funds that held stakes in it as of the third quarter of 2021.
Best Fertilizer Stocks To Buy Now
10. CVR Partners, LP (NYSE:UAN)
Number of Hedge Fund Holders: 5
Like other industries, the agriculture sector has also been hit by supply shortages in the past few months. An increase in demand for corn has led to more corn being planted. This has led to an increase in demand for nitrogen fertilizers, a key product of CVR Partners, LP (NYSE:UAN). Corn crops that do not use nitrogen fertilizers have yields affected by as much as 40%. The prices of nitrogen fertilizer have thus more than doubled in the past few months, leading to greater revenues for firms like CVR Partners, LP (NYSE:UAN).
The positive business momentum is also reflected in the share price of CVR Partners, LP (NYSE:UAN) that has climbed more than 390% in the past twelve months. With supply disruptions likely to persist in 2022, the stock has plenty of room to climb even higher.
There has been increased hedge fund interest in CVR Partners, LP (NYSE:UAN) as well. At the end of the third quarter of 2021, 5 hedge funds in the database of Insider Monkey held stakes worth $20 million in CVR Partners, LP (NYSE:UAN), up from 3 in the preceding quarter worth $18 million.
Just like CF Industries Holdings, Inc. (NYSE:CF), The Mosaic Company (NYSE:MOS), and Nutrien Ltd. (NYSE:NTR), CVR Partners, LP (NYSE:UAN) is one of the stocks on the radar of value investors.
9. ICL Group Ltd (NYSE:ICL)
Number of Hedge Fund Holders: 6
ICL Group Ltd (NYSE:ICL) is a specialty minerals and chemicals firm. The phosphate products marketed by the firm are used in fertilizers. ICL Group Ltd (NYSE:ICL) has consistently paid a dividend to shareholders for the past four years. ICL Group Ltd (NYSE:ICL) has also stepped up plans to invest in EV battery chemicals.
ICL Group Ltd (NYSE:ICL) is the leading producer of bromine in the world and has significant operations in the Dead Sea, famous for abundance of salts and minerals to exploit. ICL Group Ltd (NYSE:ICL) is a unique asset as it is also the largest producer of specialty fertilizers owing to the agro-tech expertise it employs in their production.
The market-leading position of ICL Group Ltd (NYSE:ICL) is reflected in the hedge fund sentiment around the firm. At the end of the third quarter of 2021, 6 hedge funds in the database of Insider Monkey held stakes worth $87 million in ICL Group Ltd (NYSE:ICL), the same as in the preceding quarter worth $73 million.
ICL Group (NYSE:ICL) in November declared $0.0837 per share quarterly dividend, a 60% increased from its prior dividend.
8. Intrepid Potash, Inc. (NYSE:IPI)
Number of Hedge Fund Holders: 10
In early January, Intrepid Potash, Inc. (NYSE:IPI) stock was named among a bunch of “resilient” picks in the chemicals and agriculture sector by investment bank UBS. The bank said that higher commodity and energy prices were leading to higher specialty chemicals prices, a 2021 phenomenon that would persist in 2022. A rise in potash selling prices has led to a massive increase in the share price of Intrepid Potash, Inc. (NYSE:IPI) in the past twelve months. The stock has climbed 31% in the past six months.
In addition to fertilizers, Intrepid Potash, Inc. (NYSE:IPI) also has a business in selling high-margin water to oil and gas firms. The margins for this business are expected to improve in 2022 as the firm improves water recycling capacity to 200,000 barrels per day.
As a new year begins, hedge funds seem bullish on Intrepid Potash, Inc. (NYSE:IPI) stock too. At the end of the third quarter of 2021, 10 hedge funds in the database of Insider Monkey held stakes worth $19 million in Intrepid Potash, Inc. (NYSE:IPI), up from 8 in the previous quarter worth $21 million.
In its Q4 2020 investor letter, Bumbershoot Holdings LP, an asset management firm, highlighted a few stocks and Intrepid Potash, Inc. (NYSE:IPI) was one of them. Here is what the fund said:
“From an investment perspective, Intrepid Potash (IPI:NYSE) struggled right off the bat, down roughly -30% in Jan-Feb. Intrepid despite being a significant drag on returns for most of the year, recovered at the very end of December and was a non-material contributor.”
7. LSB Industries, Inc. (NYSE:LXU)
Number of Hedge Fund Holders: 12
LSB Industries, Inc. (NYSE:LXU) makes and sells nitrogen-based fertilizers. Over the past few years, LSB Industries, Inc. (NYSE:LXU) has seen a business boom as these fertilizers become more widely accepted due to their environmental friendliness when compared to pesticides and other chemicals. Analysts expect the company to report sales of more than $500 million in 2022, an increase of nearly 4% from 2021. The EPS estimates for LSB Industries, Inc. (NYSE:LXU) in 2022 are around $0.33, compared to loss projections for 2021.
Since the ammonium sulfate fertilizer industry, a product that LSB Industries, Inc. (NYSE:LXU) markets, is expected to grow at a rate of over 4% in the next five years, it is expected that there is plenty of room for LSB Industries, Inc. (NYSE:LXU) to grab market share in the space, leading to increased revenues.
Major hedge funds have also backed LSB Industries, Inc. (NYSE:LXU) to exceed expectations in the coming months. Among the funds being tracked by Insider Monkey, Connecticut-based investment firm Tontine Asset Management is a leading shareholder in LSB Industries, Inc. (NYSE:LXU) with 1.3 million shares worth more than $13 million.
6. Compass Minerals International, Inc. (NYSE:CMP)
Number of Hedge Fund Holders: 22
Deutsche Bank analyst David Begleiter recently upgraded Compass Minerals International, Inc. (NYSE:CMP) stock to Buy from Hold with a price target of $73, noting that the shares were trading at a discount and those investors buying Compass Minerals International, Inc. (NYSE:CMP) through this period were getting a “free option” on lithium. The analyst believes the lithium potential alone could add $30 per share to the price of the stock in the coming years. Compass Minerals International, Inc. (NYSE:CMP) produces and sells essential minerals.
Despite declining salt revenues, Compass Minerals International, Inc. (NYSE:CMP) remains heavily invested in salt sales. Sale revenues for the firm account for over 70% of the total revenue for Compass Minerals International, Inc. (NYSE:CMP). The firm also has a large international business in plant nutrition.
There is positive hedge fund activity around Compass Minerals International, Inc. (NYSE:CMP). At the end of the third quarter of 2021, 22 hedge funds in the database of Insider Monkey held stakes worth $191 million in Compass Minerals International, Inc. (NYSE:CMP).
In addition to CF Industries Holdings, Inc. (NYSE:CF), The Mosaic Company (NYSE:MOS), and Nutrien Ltd. (NYSE:NTR), Compass Minerals International, Inc. (NYSE:CMP) is one of the stocks that elite investors are buying.
In its Q4 2020 investor letter, Bernzott Capital Advisors, an asset management firm, highlighted a few stocks and Compass Minerals International, Inc. (NYSE:CMP) was one of them. Here is what the fund said:
“Compass Minerals International (CMP): The stock gained 5%, normally not a bad outcome, but that stacks up poorly against many Materials stocks such as steel producers, which rebounded strongly after a couple of years of poor performance.”
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Disclosure. None. 10 Best Fertilizer Stocks To Buy Now is originally published on Insider Monkey.
