Cramer: Ag’s In Season Again
The rolling bull markets that Cramer described last week continue, this time agriculture taking the lead. It all started when the Department of Agriculture, also last week, raised its crop price forecast because of production shortfalls.
Monsanto , the genetically modified seed maker, immediately took off. The stock has climbed to $77 from $73, after management told analysts that it expects to double its gross profits by 2012. CEO Hugh Grant also said that there’s no longer any need to cut earnings estimates as a result of herbicide Roundup going generic. The higher crop prices will help to put a floor in those estimates as well.
Also key for Monsanto is the rally in corn prices, which climbed 21% to $3.73 in October. December futures now trade at $4.27. The company makes the best genetically engineered corn seed, Cramer said, the commodity’s lading value has hurt Monsanto. But now it has the chance to catch, and that’s another reason Cramer recommended the stock.
Rising crop prices mean that farmers will want to produce more to take advantage. That’s where the fertilizers come into play. Cramer’s favorites? Potash is the cheapest, he said, but he’s still partial to Terra Nitrogen’s 6.4% dividend yield.
And lastly, investors who want to play ag should buy Deere . This stock may be flirting with its 52-week high, but DE is up just 28% for the year. That’s still down 48% from 20 months ago, Cramer said. Admittedly, Deere has had a habit of underperformance, but the Mad Money host is expecting an analyst change-of-heart. An upgrade from the 12 holds and one sell should send the share price higher.
How does he know the analysts will turn bullish? Because their outlook is too bearish for the premier ag manufacturer, Cramer said, which has a great overseas business that should be helped by the weaker dollar. Plus, he thinks the company during its Nov. 25 earnings report will tell investors that its construction and forestry division has finally bottomed.
Ag’s turn to carry the market has just started, Cramer pointed out, and these rolling bull markets have lasted for at least three months. So investors can “load up on a Monsanto or a TNH,” he said, or buy Deere ahead of its quarter.
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