Hats off to Chris Peruna for introducing me to this beauty a couple months ago. I’ve been promoting agriculture stocks and the run up this year only fuels the fire. But with every play, we need to look at the peripherals that drive these stocks up. For Mon, Mos and Pot, TITN would be that driver.

The main reason I like Titan is because of their ability to acquire companies to maintain and grow market share. Revenue and EPS growth has been amazing with EPS growth surging 250% 2 quarters ago and 100% a quarter ago. Sales in the same time frame have been growing by 60% each quarter. Titan also has low debt with a generous balance sheet to support more acquisition. Cash is estimated to be a robust 36 billion by the end of 2008. Overseas sales have given agriculture companies such as Monsanto, Mosaic and Potash the room to expand supply and thus Titan has become one of the main benefactors of this demand. I read the recent SeekingAlpha article on how Titan has to continue buying companies at a furious pace or the stock will fall hard on any missed expectations. In other words, the author doesn’t believe the company can support and maintain expansion. I like his view and do agree that if the agriculture boom ends abruptly this could go ugly. But that day may not come for at least a couple of quarters if not years, till then, I’ll take my chances.

By the way, the last two times we had a 15%+ run down, the stock soared back. This pattern has been developing about once every 2 months.

Agrium has run up quite well in the past 6 months (50%) despite the inevitable recession we are experiencing. I still like Agrium’s prospects and think it will continue to run up.

This is why

1. Forecasted EPS has risen from 1.92-2.22 to 2.80-3.00 and some even believe this number to be conservative. If they include the earnings from their acquisition, this number should be surpassed

2. Agrium is the leading producer and marketer of agricultural nutrients in North and South America and produces 8 million tons of fertilizers per year. There is already an established market and demand for Agrium’s products

3. The company continues to expand its retail side in Canada, Mexico, Brazil and Asia. Analysts see this expansion as potentially doubling the $2 billion in revenue within 5 years

However, if a prolonged global recession does occur, this will hurt revenues and take the stock lower

Technically, this looks and feels a lot like the Potash chart I posted a week ago except I feel as though risk tolerance on this one would need to be higher because the movements down are alot more sudden. Probably to shake off the weak holders

Potash is a fertilizer company that produces fertilizer, phosphate and nitrate. This company’s stock has more than doubled in the past year but I think this one can go higher. There is definitely more demands in emerging markets for potash and fertilizer suppliers as a whole have seen their profits increase dramatically. This is due to the high prices of grain giving farmers the income to purchase fertilizer. Potash has a production capacity of 12.9 millin ton’s, which is 20% of the world capacity. The company has a new price estimate of 265 based on a growing EPS of 9.80 for this year. The 19 PE given a 51% growth makes POT rather cheap. This company also has the chance of splitting its price which could attract new buyers.
Technically, this stock seems to follow the pattern of consolidation, breakout, retrace.
Since POT just broke out of a consolidation period, I wouldn’t get in until a retrace as the stock seems to have fallen into that pattern.