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3 Best Agriculture Stocks To Buy Right Now

Though not the sexiest of investment sectors, agriculture stocks could be the next big thing for the rest of 2015 and beyond, thanks to fundamental catalysts sending ripples across the industry.

Tractor plowing farm field 630
Source: iStockphoto

Bad boy enterprise Monsanto (MON) — the object of populist anger due to its proliferation of genetically modified organisms, or GMOs — recently made a bid to acquire Syngenta (SYT), a company that’s been on the up and up thanks to the renewed investor interest.

Syngenta coolly rejected Monsanto’s $45 billion offer, which would have represented a 17% premium over SYT stock’s current market capitalization. Monsanto is desperate to acquire Syngenta’s agricultural chemicals business, which is instrumental for the bidder’s expansion plans.

To make the deal more palatable to antitrust regulators, Monsanto offered to sell SYT’s seed business, with several agriculture stocks or companies with agricultural divisions, including DuPont (DD) and Dow Chemical (DOW), eager to pounce should an agreement be reached.

Whatever one’s reservations are towards Monsanto, one thing can’t be denied. The proposed SYT deal — Monsanto’s second offer in just this year alone — is churning up extraordinary interest in agriculture stocks.

Here are three top agriculture stocks that should benefit from the Monsanto boost:

3 Best Agriculture Stocks to Buy Now: Intrepid Potash (IPI)

3 Best Agriculture Stocks to Buy Now: Intrepid Potash (IPI)
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Source: Source: JYE Financial, unless otherwise indicated

Fundamentally, there’s much to like about IPI stock. First, there’s strength in the balance sheet, with its most recent financial statement showing a very favorable total assets to total liabilities ratio of 5.4. In addition, a majority of IPI stock’s liabilities is from long-term debt, which is at a manageable level — relative to the value of current assets — of $150 million.

What’s distracted many investors from the IPI stock opportunity is the technicals. Year-to-date, IPI stock is down 14% as the company has struggled with its earnings performance, which has declined significantly over the past three years. Further adding to the pain is that volatility has been consistently wild throughout the years. Between 2011 and 2013, IPI stock has lost 42% of market value. Over the next two years, the company lost 47%.

However, recent trades have shown signs of stability. For example, the average price of IPI stock over the past three months is $12.06, which is a 4.4% improvement over the average price for March at $11.55. The 10% swing on June 25 also put IPI stock above its 50-day moving average, which may suggest that the bulls are ready to reengage this opportunity.

IPI stock is on the speculative side due to its bearish history, but a sector turnaround can make it one of the most profitable names among agriculture stocks.

3 Best Agriculture Stocks to Buy Now: Mosaic (MOS)

3 Best Agriculture Stocks to Buy Now: Mosaic (MOS)
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Source: Source: JYE Financial, unless otherwise indicated

The difference in magnitude between MOS stock’s high and low for the year is over 24%. To put this into perspective, MOS stock has risen 5.8% since mid-June, yet year-to-date it’s only up 3%.

However, much of that choppiness could be coming to an end, thanks to MOS stock’s strong financial health. Mosaic’s debt-to-equity ratio currently stands at a favorable 0.38, indicative of management’s ability to keep long-term liabilities in check. In the most recent quarter, MOS stock has shown a 48% improvement in earnings per share on a year-over-year basis.

Additionally, net income growth against the same time frame has substantially exceeded that of the benchmark S&P 500 index as well as the chemicals industry.

From a technical perspective, MOS stock hasn’t quite lived up to its full potential. Since collapsing in the middle of 2013, MOS stock has frustrated investors as it ping-ponged inside a sideways consolidation pattern lasting nearly two years.

But that might change fairly soon. Over the past three months, MOS stock has gained nearly 6.5% in the markets, with most of that coming from the last two weeks of trading. At its present price tag, MOS stock is firmly above both its 50- and 200-day moving averages.

Combined with its robust financials and renewed interest in agriculture stocks, MOS stock has the potential to turn several heads on Wall Street.

3 Best Agriculture Stocks to Buy Now: Agrium (AGU)

AGU stock, technical chart
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Source: Source: JYE Financial, unless otherwise indicated

A recent patch of bad luck — in particular, an unfavorably late start to the spring season — resulted in earnings performance and revenue trends missing Wall Street consensus for the first quarter. Because of this and volatility in the markets — AGU stock is down 1.5% since the release of Q1 earnings on May 5 — Credit Agricole downgraded Agrium from “outperform” to “underperform.”

This is a short-sighted mistake, according to entities that can actually sway the markets. Renowned investor Jeffrey Ubben’s hedge fund, ValueAct Capital, recently disclosed a 6.8% ownership position in AGU stock. What’s more, its continuing to load the boat, suggesting a strong conviction in the agricultural distributor’s management team and that the latest choppiness in AGU stock is only temporary.

The statistical trends do in fact align with ValueAct Capital’s bullishness. Between AGU stock’s initial public offering on May 5, 1995 until March 2015, whenever shares posted positive gains over a three-month period, there is a 72% probability that the next three-month period will build off of the previous momentum.

From a long-term perspective, AGU stock is still riding a bullish trend channel that has been intact since the beginning of 2010. Against the nearer-term, the price action of AGU stock over the last 60 days indicates that a new support baseline may be developing. If so, we could potentially see a challenge of upper resistance at the $115 level, especially with the backing of the big boys.

Don’t let the noise distract you — overall, AGU stock is a sound investment and that’s why the smart money is accumulating it.

As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.

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Article printed from InvestorPlace Media, https://investorplace.com/2015/06/3-best-agriculture-stocks-buy-right-now-ipi-mos-apu/.

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