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Terra May Offer Growth in More Than One Way



September 16, 2008 – Comments (1) | RELATED TICKERS: TRA.DL

[Rather than the usual the-financials-are-doomed blogs, I thought I'd provide something a) about an individual non-financial stock, and b) positive rather than negative.  Plus it's also one that I own and am still very bullish on.]

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A fertilizer company may be able to help your investment garden grow, even in turbulent markets such as this. One fund manager says Terra Industries is a great buy, even during less-than-stellar economic times, because people will always need to eat.

“There’s a shortage of agricultural products and seeds right now and Terra provides fertilizer that helps crops grow faster,” says Jim McCarthy, President and Chief Investment Officer at Seascape Capital in North Hampton, N.H.

McCarthy said the company is cheap by his standards, and “although people think recession is a danger, analysts have increased their estimates, regardless, for Terra.”

Terra Industries, based in Sioux City, Iowa, was $25 a share a year ago, the fund manager noted. Now it’s at $40 a share. In the last few months, with the fear of recession, most commodity-type companies had large pullbacks. Terra hit a high of $57 in July to the $40 it is today, but is earning three times what it was a year ago and demand is not going down.”

Because the company provides a necessary product for our food supply, demand is not going away and that is key, according to McCarthy. “No matter what happens today, people will continue to eat.”

McCarthy thinks the stock is greatly undervalued and is probably worth double what it is today. He adds that although there are other stocks in the same sector like Potash, based on fundamentals and technicals, Terra ranks in the top 1%.

The stock has been basically in sync with the broader market. “We’ll start to see commodities come back. We’ve seen them go down during the last three summers when the consensus has been that it ‘appears’ we’re going into recession. So we’re looking for a good turn-around in terms of price and fundamentals,” says McCarthy.

This stock is right for anyone who is investing in the equity market with a diversified portfolio with a one-year horizon, says the fund manager. “You can get some violent turnarounds every couple of years, but if you understand what the company’s all about and what the product is and how essential it is to agriculture supply, that doesn’t change. So most agricultural products should not be affected by recessions.”

1 Comments – Post Your Own

#1) On September 16, 2008 at 4:50 PM, wrote:

Thank you.  I was beginning to think I was crazy.  There is still risk involved, but why is their P/e way lower than Citibank for example. 

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