LSB Industries And CVR Partners – Fertilize Your Portfolio Growth With These Two Value Picks

LSB Industries And CVR Partners - Fertilize Your Portfolio Growth With These Two Value Picks

Summary

Global fertilizer supplies have been constrained as demand increases leading to higher revenues and earnings for fertilizer producers.

LXU and UAN are two smallcap value picks that offer growth and income for investors at a reasonable price.

Growth in organic fertilizer demand and new low carbon ammonia products are some of the future opportunities that LXU is pursuing.

UAN offers a high yield distribution of 21% at the current market price with relative price stability in this current volatile market.

moiseXVII/iStock via Getty Images In my quest to identify buying opportunities during this volatile market environment, I have been following the trends of rising inflation, escalating oil prices, and declining stock prices. Despite the overall market downturn, there are some sectors of the economy that are still growing, and that may in fact benefit from some of the trends that we are experiencing. Energy stocks, shipping, basic materials, and precious metals like gold and silver, are all showing promise as demand increases and supplies are squeezed.

With sanctions against Russia increasing the pressure on some commodities that in normal years are supplied by Russia to the rest of Europe and other parts of the world, the supply is likely to become even more constrained leading to yet higher prices. The impact on oil prices has recently been demonstrated and now prices of other commodities including fertilizer for agricultural, industrial, mining and other uses are also starting to be impacted. There are record high prices for fertilizer already, and the sanctions have only just begun. This offers a potential opportunity for companies that can fill the void and increase supply at higher prices, increasing their profit margins.

Some of the larger companies that dominate this sector include Nutrien Ltd ( NTR ), CF Industries ( CF ), and The Mosaic Company ( MOS ). Even before Russia decided to ” temporarily suspend fertilizer exports “, the stocks of all these companies have seen significant share price appreciation over the past several weeks. This trend is likely to continue as the spring growing season gets underway in the northern hemisphere and farmers all over the world are increasing the demand for global fertilizer as supplies are constrained. The global fertilizer market is anticipated to witness remarkable growth in the 2021-2028 timeframe. Rising adoption of organic fertilizers among farmers is driving the growth of the market. The organic sub-segment, solid sub-segment, and agriculture sub-segment are projected to lead the market. The Asia-Pacific market is anticipated to be at the forefront. North American growth in organic fertilizer is one of the biggest opportunities for agricultural purposes and is expected to grow at a CAGR of over 13% from 2022 thru 2027 according to one source : The market is recovering gradually, and it is gaining momentum. There is an increasing demand for fertilizers due to improved economic conditions, and this is anticipated to lead to a positive outlook during the forecast period. At present, the organic fertilizer market in North America has recovered after experiencing a phase of gradual growth. Companies operating in the organic fertilizer market in North America took several measures to ensure efficiency in their supply chains. For instance, Nutrien Ltd, North America’s biggest farm retail supplier, moved up its shipments of crop supplies by two to four weeks from its normal spring schedule, as a precaution. The company asked farmers to place orders via phones or online channels, and it made sure that the supplies were delivered to them. Grain prices (wheat, corn, soybeans) have risen dramatically already in the first quarter and are expected to continue rising . Russia and Ukraine are typically high exporters of wheat and other grains, so the ongoing war will further disrupt supply putting even more pressure on costs. Those higher costs are passed on and help to increase profits for the fertilizer makers.

So far in 2022, many of the companies involved in fertilizer production are seeing a rapid rise in revenue and earnings growth, however, two stocks in particular look especially enticing to me from an investment perspective at the present time. That is to say that for my investment profile they appear to be a good value at the current price. Those stocks include CVR Partners ( UAN ) and LSB Industries ( LXU ). CVR Partners ( UAN ) for Income and Value

Both stocks have seen a rapid increase in share price in the previous 12 months with UAN up 187% and LXU up 464% (most of that in the […]

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