The agris are the new solars. That’s right forget technology, lately, it’s all about profiting from Mother Earth. Agriculture is hot right now because analysts say it’s a good defensive sector (probable self-fulfilling prophecy there), China is supposedly changing their diet habits to match ours (sure, why not) and of course agri products can be used in fuels and any kind of energy connection is hot (seriously).
I’ve been watching/trading a few smallcap agri plays, lots of people seem to think these stocks could have solar-like runups, again, probably making that theory a self-fulfilling prophecy. After all, the markets were down huge the past few days and the agris were hot—imagine what happens when the market doesn’t get wrecked. Here are a few of the key players to look out for:
Origin Agritech (Nasdaq: SEED), $10.91, Chinese agri play, 743 employees, $250mm marketcap, 4mil shares short, one analyst says revenues will triple from $60mm to $180mm and earn 50 cents/share next year. Solid chart basing around $8, so even after Friday’s 25% runup, it’s not very extended. The bad news, even with this spike, it’s still stuck in a nasty downtrend since the beginning of 2006, aka there are tons of bitter sellers, so it takes huge volume for this thing to go anywhere, 8 million shares traded did the trick Friday. Monday morning should be a nice gap higher, after that, it depends on the trading volume, I’m definitely bullish, but cautiously so, the comparisons to stocks like SOLF, CSUN and CSIQ (setting up similar chart pattern) will help.
Converted Organics (Nasdaq: COIN ), $8.70, Boston-based fertilizer/recycling play, $37mm marketcap, 6 employees, 2.8mil share float, sketchy PR firm in http://www.prfmonline.com (sketchy is good, short-term!), no revenues, losses, probably need funding soon, base in the $2-3 range, extended here, but the low float/marketcap means it can go further faster than SEED. Nice 5 day breakout, so I’m bullish, as long as the volume can remain 1 mil shares/day, definite Monday gapper, but can it make it to double digits in the morning?
New Oriental Energy (Nasdaq: NOEC ), $6.22, Chinese fertilizer play, $78mm marketcap, 1,076 employees, 5mil shares short, solid Nov. earnings report quarterly revenues up 130% to $18 mil, profits near $1mil (not that you can really trust any Chinese company’s numbers, not racist, just a realist—they have no SEC!), lower trading volume, base at $4, again, lots of sellers here—maybe they don’t like the constant PRs from smallcap newswire they paid for! (classic pumping in order to get the share price up in order to raise capital) I’m bullish, but also cautiously—I’m not surprised to see all these signs of pumping (when volume drops, these stocks get wrecked).
Titan Machinery (Nasdaq: TITN ), $17, Northwest-based agri/construction stores, $75mm marketcap, 555 employees, recent IPO, at $8.50 so already a double, $120mil in debt is a problem but recent earnings were niiiiiiice—quarterly revenues up 67% to $132 mil, earnings $6mil, improving margins, same store sales up 24%, forecast of 77 to 82 cents in profits for next year so a forward PE of 21 isn’t bad at all. Nice breakout Friday above $15 on earnings news. These guys supply the agri industry, think Levi banking off selling jeans to gold miners—I think this goes much much higher.
AgFeed (Nasdaq: FEED ), $9.40, Chinese pig feeder/breeding (seriously), $250mm marketcap, 11mil share float, 50k daily volume, incredible earnings, quarterly revenues up 500% to $12mil, profit of $2mil, they care little for short-term shareholder profits—filed a $75 mil shelf offering, but solid base in the $8 range. Not in play right now, but this is definitely one worth watching, how fun would it be to say you made money on a Chinese pig feeding company?
Disclosure: Should be long COIN, SEED and TITN, but if you read my blog/book , you’ll see that for all the millions I’ve made, I have some major discipline problems, aka why I’m blogging and helping others get rich instead of silently running a fund and making myself rich. So, no, I have no positions.
Posted in So Hot Right Now