TSCO Tractor Supply Company

I wrote an "Investment Ideas" last fall that talked about what I saw as a pending boom in agriculture stocks. The premise of the strategy was based on surging prices in agrcicultural commodities like corn, beans and wheat with a lack of impact on the equity side of the business.

Although a lot of analysts wouldn't know the difference between $4 and $6 corn, my 8 years of experience trading ag futures at the Chicago Board of Trade told me that when beans hit the teens, farmers are about to start making and spending serious amounts of cash. The strategy turned out to be a big winner, with all four stocks outperforming the S&P 500 for a strong net out performance. Take a look at the chart below for a closer look at how each individual name fared.

My 4 Ag Picks from Last Fall

*chart sourced from Yahoo!*

But what you can also see in the chart is how ag stocks have followed the weak market lower over the last 6 weeks. While that would seem totally normal on the surface, what is interesting about this dynamic is that the downward pressure comes as estimates have risen on strong Q1 earnings. And in the world of stock and valuation analysis, that is a screaming buy.

So with the food shortage story well in play on a booming global population and unpredictable weather, let's go ahead and take a second swing at some of our favorite agriculture stocks. One name was included in the first report, but I've added five fresh ideas to help you beef up your agriculture portfolio. And if you're interested in checking out the original peice from last October, here's a link to that too.

Are Ag Stocks the Next Gold Trade?

Top 6 Agriculture Stocks

CNH Global (CNH) is a global leader in farming equipment with a market cap of $9.8 billion. This Zacks #1 rank stock has recently pulled back from its 52-week high in the weak market, falling from $54 to $37. But like I mentioned above, it comes as estimates are on the rise, with the current year up 18 cents in the last 60 days to $2.94. That has made this a value stock, trading with a forward P/E of 13X against its peer average of 14X.

Bunge (BG) is a top name in agribusiness, wholesaling grains with satellite operations in Brazil. This Zacks #1 rank stock has also declined over the last month, but in the meantime estimates are up, with the current year adding 36 cents in the last two months to $6.31.

CF Industries (CF), also known as the most insanely undervalued fertilizer stock in the world, has been holding tough in the weak market, with shares lingering in elevated territory. That defintely has something to do with the compelling valuation, where this Zacks #1 rank stock has a forward P/E of 8.9X, a sharp discount to ite peer average of 11.5X.

Tractor Supply (TSCO) operates retail farm and ranch stores in the United States with a market cap of $4.8 billion. This Zacks #2 rank stock has been a top performer over the last year, hitting new high after new high on booming sales and earnings. The valuation is a little richer here, but this mid capper is still in a strong growth cycle.

The Andersons (ANDE) is basically a smaller version of Bungee, an agirbusiness company with a market cap of $750 million. ANDE has pulled back in the last two months while estimates have risen, making the company's forward P/E of 10X serious relative and absolute value.

And finally, we have the Lindsey Group (LNN), an irrigation specialist with a market cap of $773 million. This Zacks #2 rank stock has seen its current-year estimate climb 40 cents in the last two months to $2.69 while shares have pulled back from $83 to $63. So even though the forward P/E of 23X is a premium to its peers, this is another small capper that is in the midst of an aggressive growth cycle.

Long-Term Gains in Agriculture

So as you can see, the recent pullback in the market has created some value opportunities in agriculture stocks. And with long-term compression between supply and demand supporting prices, ag stocks are a good place to be looking for your next big winner.

**Author Disclosure: I own shares of BG, DE and CF**

Michael Vodicka is the Momentum Stock Strategist for Zacks.com. He is also the Editor in charge of the Zacks Momentum Trader Service.
 
ANDERSONS INC (ANDE): Free Stock Analysis Report
 
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CF INDUS HLDGS (CF): Free Stock Analysis Report
 
CNH GLOBAL NV (CNH): Free Stock Analysis Report
 
LINDSAY CORP (LNN): Free Stock Analysis Report
 
TRACTOR SUPPLY (TSCO): Free Stock Analysis Report
 
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