Yesterday I started working on the latest teaser from Elliott Gue for his Personal Finance newsletter — it was a little bit anticlimactic, since the water treatment stock he’s teasing is a tough one for most small US investors to buy … but the good news is, that was just one of several stocks he’s teasing to follow his theme that “resource depletion is the biggest investment story of the decade.”
And today is your lucky day! Your friendly neighborhood Stock Gumshoe is on board to identify the rest of them for you, no subscription necessary.
There are a bunch, so I’m going to keep my pontificating to a minimum and just try to ID the stocks for you … so let’s get started.
Here’s the broader pitch:
“5 Investments So Powerful They Could Create Life-Changing Wealth (as They Change the World).
“Clean water…land…high-yield, disease-resistant, vitamin-heavy seed…clean energy…fertilizer.
“Put them together in the right proportion and you can avert the world’s most potent disasters. And become rich in the process.
“In each of these categories I found you a handful of companies that will help change the course of history. These are the ones that can make you rich:”
So we already looked at the water one (that article from yesterday is here, if you’re having trouble keeping up with the group). Which one comes next?
“The Biotech Agriculture Revolution and the stock you could retire on …
“The biotech seed industry is taking off fast. Already, more than 75% of the world’s soybeans and a quarter of all cotton are grown from genetically modified (GM) seeds that control weeds and pests, and increase yields.
“But that kind of seed only covers 7% of the world’s farmland, so there’s still a huge amount of growth ahead.”
The stocks behind most of our GMO crops always inspire a good debate among investors — there are myriad issues, from the ethics of patented food crops to possible unknown health and environmental impact … but what we’re looking for is one of these stocks in particular. Which one?
“There are dozens of agricultural seed companies worldwide, but just as in pharmaceutical companies, your best investment is the one with the biggest blockbusters either in the market or in the pipeline.
“And for that, there’s one clear leader. They’re the single biggest innovator in agricultural biotechnology, with a number of blockbusters like corn that increases ethanol yield and canola plants that do their own weed control.
“Plus, because they spend an incredible $2.6 million on R&D each day, they have a deeper, richer pipeline than ever.
“All those products in their pipeline mean profits!
“Right now they’re developing the first soybean with insect protection built into the seed, and corn that arms its stalks against destructive corn borer moths.
“Their pipeline is giving us creative solutions to nutritional problems, too, like soybeans with high levels of heart-healthy Omega-3 fatty acids….
“One of the world’s leading financial publications declared them the ‘Company of the Year’ for 2010.
“I’m declaring them the best place for your long-term growth money right now.
“I’m not talking about over the next year. I’m talking about over your lifetime.Are you getting our free Daily Update
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“Get in before it takes off and this could be the stock you retire on.”
Well, it wasn’t 2010, it was 2009 — but I suppose the printed magazine actually came out in early 2010 … this is, you will probably not be surprised to hear, the ag tech giant Monsanto (MON).
I won’t go deep into Monsanto, we’ve discussed it briefly in the past and it’s the poster child for GMO seeds and by far the market leader, at least in the US, though there is certainly plenty of investor concern over whether they can keep the innovation and profits coming. That Forbes article in January provided a pretty good overview of the company an the challenges, though the stock is down substantially from that time period and way, way down from the heady days in mid-2008 when the shares were briefly near $150 (they’re at about $56 now, a mild recovery after going down for the first six months of this year). There was also a more recent article from the Motley Fool questioning the sustainability of Monsanto’s (growing but relatively paltry) dividend.
So that’s one, and it’s a large cap industry leader that still carries a blue chip valuation and seems to be roughly where analysts think it belongs (the average rating is roughly a “hold”), so there’s no end of opinion out there if you’d like to dig further into Monsanto. Let’s move on …
“The Other Energy Crisis
“30% profits in 24 months in my #1 uranium stock
“The world only has about 70 years’ supply of reactor-grade uranium left. But there are 50 new reactors under construction and 130 in planning stages worldwide, which will add an incredible 42% more nuclear power plants within the next decade to 15 years.
“That means our uranium supply will fall even faster.
“Every year mines produce only two-thirds of current needs, so power companies are outbidding each other in a frenzied effort to secure supplies.
“There’s one company in the catbird seat, though.
“It is the dominant player in an area of the world where the uranium ore is 100 times richer than anywhere else.
“That gives it some of the lowest extraction costs in the industry, so more goes in the pockets of shareholders.
“The company has long-term supply contracts, which means built-in protection against spot price volatility.
“Plus shareholders benefit from other profit centers like owning uranium processing and power generation plants.
“And to add a little rocket fuel to profits, they buy uranium low from other producers and sell high.
“No wonder the company just reported record earnings, with a whopping 120% jump in net earnings to $1.1 billion.
“Every $1 increase in the price of uranium adds around a dollar to the company’s net asset value.”
So … hoodat? This is yet another large cap industry leader, Cameco (CCJ)
And it’s hard to argue against Cameco if you’re just looking for exposure to increasing uranium prices — they’ve had their troubles in the past, mostly with actual physical challenges in their mines (flooding, etc), but they are certainly the biggest “pure play” company for uranium, and unlike most of the uranium juniors they’re profitable and producing in a mining-friendly place. Uranium has become a real boom and bust commodity, so this will probably continue to be a pretty big swinger as those prices continue to move, but if you think uranium is going higher Cameco would certainly be one of the first places to look for profits.
Cameco did make about a billion dollars last year (with a market cap of about ten billion, so a trailing PE ratio of near ten), but analysts think we’re in a bit of an earnings dip after the boom in 2008 that trickled into 2009. The forward PE is about 20 for this year, but analysts do see 2011 bringing earnings growth, and heady growth over the next five years, and the company has beaten analyst estimates for the past two quarters.
But we’re moving on … next!
“Up-and-Coming Commodity Taking the World by Storm
“22% profits over 6 months and 400% or more longer term
“Investing in this commodity isn’t about shrinking supply. It’s about vastly increasing demand.
“It’s a common ingredient in food, soap, cosmetics and machine lubricants.
“In fact, you’ll find it in one in ten food products in your grocery store. And that’s where exploding demand starts.
“Sales of packaged foods in China and India are growing so fast that they’ll double by 2014 as incomes rise and people trade up from their simple diets.
“Plus the West is discovering this oil is healthier than many oils we use that are heavy in hydrogenated fats….
“… output can’t keep up.
“Malaysia is the world’s largest producer, but severe weather and government setbacks are causing severe shortages.
“On top of that, environmentalists are protesting the slashing of tropical forests to make room to grow more, which tightens supply even more.