Terra Nitrogen Company, L.P. (TNH)

marc64 (98.19) Submitted: 6/16/08 3:00 PM : Start Price: $129.45 TNH Score: 5.67

Major bargain.

I don't know how this fertilizer company managed to flub the recent huge opportunity to capitalize on the AG boom, but they did. The colossal fumble means they currently enjoy a P/E to die for, in an industry where P/E is stratospheric, even as profitability is very, very positive.

The question is, Can management turn this around, and return some value to shareholders?

Dunno, but I really like the industry they are in, I think their profits will continue to come in great, hopefully consistently enough that the share price will reflect some confidence. Terra is in a position to formulate nitrogen fertilizers precisely for the need, and the demand is there in a growing way for what they make. Gas prices notwithstanding, they may get to a position to charge whatever the market will bear, because AG can increase profits using the right nitrogens.

I'm betting this company will mint money as AG continues to move to maximize yields through better chemistry; Terra's share price has badly lagged at this point, but my pick reflects the belief it will catch up.

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