For Immediate Release
Chicago, IL – October 15, 2010 – Stocks featured in this week’s Zacks Industry Rank analysis include BHP Billiton (BHP), and Potash Industries (POT).
Zacks Industry Rank Analysis is written by Dirk Van Dijk, CFA, Chief Equity Strategist for Zacks.com.
Up, Down on the Farm
This year looks like it is going to tie 2005 for being the hottest year on record, and all of the ten hottest years on record have come since 1998. One of the main effects of this has been just plain wacky weather, and weather that has had some disastrous consequences.
No industry is more dependent on the weather than agriculture. The weird weather has led to significant crop losses around the world, including the floods in Pakistan and the fires and drought in Russia.
As a result, agricultural commodity prices have been soaring. The result is much higher farm incomes for the areas that have not been hit with crop failures, most notably the U.S. If you are reading this, then you are probably more inclined to invest in equities than you are to take a flyer on soybean meal futures.
So are there any good ways to play the world food shortage through stocks? In a word, yes — and the Zacks Rank is pointing to a few areas that show great promise. Two relatively small industries, based on the number of firms, are well positioned to benefit.
The Zacks industry classifications are very fine, with 256 different industries tracked. It is not particularly noteworthy if a single small industry shows up doing well — a single firm with good news can propel a one or two firm industry to the top (or bottom) of the charts. It is interesting, however, when you see a cluster of similar industries at the top of the list. The same holds true for the bottom of the list.
The Farm Machinery industry is relatively small, with only six firms in it, but it has a few big firms in it. I should note that it is not just the Farm part of Farm Machinery that makes it look attractive; other machinery industries such as general Machinery and construction machinery are also stronger than average. However, Farm Machinery is in the number 3 spot of the 256 industries we track, slipping one spot from last week as the average Zacks Rank rose to 1.83 from 1.50.
The second group that is poised to benefit is Fertilizers. That industry is in 21st place, but that is an improvement of 69 spots over the last week, as the average Zacks Rank fell to 2.38 from 2.88. The industry has 8 firms in it. It has been in the news of late due to the attempt by BHP Billiton (BHP) to buy Potash Industries (POT), the largest fertilizer firm in the world. BHP just might be onto something here.
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Contact: Dirk Van Dijk, CFA
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