In a recent Wall Street Journal interview, Jeremy Grantham became the latest legendary investor to advocate stocks in the farming sector. He joins others such as George Soros and Jim Rogers. Grantham is bullish on farming stocks, particularly those having to do with fertilizer, due to the tremendous growth in China and other emerging markets.
For growth, income, and value investors there are many compelling stocks in the agriculture sector that are suitable as long term investments.
Caterpillar (NYSE: CAT), Deere & Co. (NYSE: DE), and Potash Company of Saskatchewan (NYSE: POT) are all blue chips from the farming industry positioned to profit from future growth. It is has been a difficult year for all three. For 2013, Potash Company of Saskatchewan, the fertilizer giant, is off by more than 20%. Over the same period, Caterpillar, the world’s largest heavy equipment maker, is down by nearly 5%. Also a major builder of tractors and other machinery, Deere & Co. has fallen by nearly 3% for this year.
But there is much to be bullish about for each company.
Earnings-per-share growth is in the double digits for Deere & Co. Caterpillar is selling at a price-to-earnings growth ratio of just 0.66, a one-third discount. The profit margin for Potash Company of Saskatchewan is nearly 30%.
From each of these companies, there is a healthy dividend higher than the average of 2% for a member of the Standard & Poor’s 500 Index that pays investors to wait. For Potash Company of Saskatchewan, it is over 4%. The dividend for Caterpillar is 2.85%. For Deere & Co., the dividend yield is 2.4%.
As the Chinese economy begins to grow, these stocks and others in the farming sector will perform better. There is growth, value, and income appeal for investors. Following Jeremy Grantham, Warren Buffett, and Jim Rogers is a savvy way to profit.