Five Ways to Play the Top-Performing Fertilizer Producers

Fertilizer producers CF Industries Holdings (CF) and Terra Nitrogen (TNH) rode last week's volatility, reaching a series of new 52-week highs and ending the week at $168.20 and $169.60 per share, respectively.

CF Industries saw some analysts raise their price targets on the stock following the recent second-quarter earnings report. The company's board also quadrupled its quarterly dividend to $0.40 per share. The Illinois-based chemicals company manufactures and distributes nitrogen and phosphate fertilizer products to agricultural and industrial customers worldwide. It is an S&P 500 company with a market cap of $12.1 billion.

The long-term earnings per share growth forecast is 10.9% and the return on equity is 23.6%. The dividend yield is 1.0%. The P/E ratio and the PEG ratio are in line with the industry averages. The share price rose about 15% last week and is about 25% higher than at the beginning of the year. Over that time, the stock has outperformed competitors Agrium (AGU) and Potash (POT) as well as the broader markets.

Terra Nitrogen, an Iowa-based producer of nitrogen fertilizer products to agricultural and industrial customers in the US, last week reported strong year-over-year earnings growth for the second quarter. Terra Nitrogen GP serves as the general partner of the company and is a subsidiary of CF Industries.

This $3.1 billion market cap company has a quarterly payout yield of 6.7%. Its return on equity is 97.4% and it reports no long-term debt. The 10.9 P/E ratio is less than the industry average.

The share price is more than 103% higher than a year ago, as well as up more the 8% in the past week. The stock has outperformed CF Industries and Mosaic (MOS), as well as the broader markets, year to date.

Action Items:

Bullish: Traders interested in ETFs invested in CF Industries might want to consider the following trades:

• Market Vectors Agribusiness ETF (MOO) is up more than 19% in the past year.
• Rydex S&P Equal Weight Materials (RTM) is up more than 10% in the past year.

Bearish: Traders looking for a contrarian angle may want to consider this alternative:

• Daily Agribusiness Bear 3x (COWS) is up more than 6% year to date.

Sino Clean Energy moved 10.75% higher after Benzinga Pro reported the Chairman share purchase.

Editor's Note: This story was originally posted on Benzinga.com by Nelson Hem.

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