We’ve done something a little different this week, featuring a new trading idea each day that my research team and I find intriguing as a potential deep value for 2015. I hope you’ve been enjoying this series so far.
Today we’re going to look at a stock that’s been on my short list to go long. It could potentially double from its current level. But if the company keeps up the momentum, it could even become a 200% gainer.
See how this fertilizer company is potentially sowing some very profitable seeds …
Note: Trouble viewing this message? Click here to read it on our website.
STOCK OF THE DAY: Terra Nitrogen (TNH)
Terra Nitrogen (TNH) produces and sells nitrogen fertilizer products for agricultural use. I’ve written recently about deflation taking hold in Europe and elsewhere, but food prices are one of the exceptions to that rule.
Even if the world can produce enough food for everyone, it isn’t always available in the right place at the right time. That means the food business can keep growing — and TNH is a key player.
Lower energy prices could give Terra Nitrogen another boost. Natural gas is a big part of the fertilizer production process. Lower gas prices combined with higher fertilizer demand could give companies like Terra a double boost.
The Alpha Scorecard cash flow valuation model assigns TNH a $236.87 12-month target price. That’s more than double its current price around $116, so you can see the potential.
Better yet, Terra Nitrogen has a 6.8% yield, so when the time is right to buy, you can get paid a little cash while you wait.
What could go wrong? Well, fertilizer isn’t the most exciting business, so you won’t see Terra Nitrogen in the headlines very often.
Agriculture policy is also politically sensitive in most countries. You never know when some bureaucrat will change the rules.
TNH popped higher in the last month as energy prices fell, and I think the stock price may be a little ahead of itself. I’m watching for a chance to buy at lower prices — and then hold for the long run.
If you want to catch up on the first four trading ideas we covered together this week, you can click on the stock name to read what our Alpha Scorecard valuation tool is telling us about them:
We’ll return with your next Afternoon Edition and the sixth stock in our seven-part series on Tuesday, Jan. 20. In the meantime, I wish you a safe and enjoyable long holiday weekend, and I thank you for your continued readership.
Your time and thoughts are valuable to me, and my inbox is open all weekend. I’d love to hear your thoughts about these stock ideas, the markets or any other investing-related topics you’d like to know more about.
Today’s top-of-mind issues were fallout from the Swiss currency move, economic data and of course the energy sector. Here are some quick highlights.
- As we predicted yesterday, the sharp change in Swiss franc/euro exchange rates caught some players unprepared. FXCM, a large currency broker, lost its entire capital base as customers failed to meet margin calls. The firm is in talk with Leucadia National Corp. (LUK) for a cash infusion.
- Energy stocks zoomed higher as crude oil climbed. SPDR Energy ETF (XLE) rose 3.25% and WTI crude oil fell 5.3% to $48.69.
- The economic data wasn’t necessarily good, but at least it wasn’t terrible. That’s how traders saw it, anyway. U.S. consumer confidence rose to an 11-year high as unemployment receded and lower gasoline prices brightened driver moods.
- The Consumer Price Index recorded its biggest monthly drop in six years, falling 0.4% in December. No mystery what caused it — the energy component of CPI by itself plunged 4.7% last month.
- CPI rose 0.8% for the full year 2014. That historically low figure makes the Federal Reserve’s monetary policy decisions a tough call. Traders today seemed to read it as likely pushing back any interest rate hikes into late 2015.
- Lower inflation expectations are also putting downward pressure on long-term bond yields. The benchmark ten-year U.S. Treasury rate dropped to almost 1.7% this week before rising to a still-low 1.84% today. Mortgage rates are sliding too, so now might be a good chance to review yours. Refinancing could pay off.
Good Luck and Happy Investing,
Uncommon Wisdom Daily