Tag Archives: agriculture

UBS goes bullish on the food trade

As we have been saying around here for months, food is becoming very hot in the emerging world and throughout the globe. Wall Street is just now catching on.

UBS recently raised its targets on a number of key food names, revealing that the giant Swiss bank thinks these stocks could rise by 11% to 40% over the near term.

Still, while the targets are rising, UBS is keeping most of its ratings on these stocks right where they are. This usually reflects a case where the analyst is stubbornly refusing to acknowledge anything beyond the fact that a stock or sector has run up farther than he or she thought it would.

UBS now thinks potash producer Agrium (AGU, quote) — the only true “buy” in this list, as far as the bank is concerned — will hit $95 a share in the near future. This makes a certain sense, given the strong bid that the entire potash group has received in the wake of recent M&A buzz.

Farm equipment makers CNH Global (CNH, quote) and Deere (DE, quote) will reach $40 and $75, respectively, in the bank’s estimates.

And even tractor maker AGCO (quote), which UBS rates as a “sell,” could jump 12% to $36, according to the latest estimates.

We are not bullish on the tractor names — it sounds like UBS is not either. Soft commodities like sugar are a better bet at this point.

Commodities Stocks

DuPont: Global Agriculture Exposure and Operating Leverage

E. I. du Pont de Nemours and Company, or DuPont, (DD) is exactly the kind of U.S. company we like to focus on who is leveraged to the global economy and, in this case, is also heavily geared towards the soft/agriculture space where emerging markets will drive higher prices for grains and fertilizers for years to come.

The food shortage trade will be a big picture theme worth playing over the next five years.

UBS has a highlight on DD this morning that says with 64 percent of its sales outside the U.S., including significant exports, DD is a diversified play on an improving global economy. Also, a weak dollar is good for U.S. farmers, and thus it’s positive for DD’s agriculture & nutrition division.

UBS says DD has delivered upside earnings per share (EPS) surprises for the past two quarters, and UBS analyst Don Carson believes investors underestimate the changes DD has made to improve operating leverage. Don