Invest Like Jim Rogers, Buy Potash Corp./Saskatchewan and Agrium Inc.

Want to profit from commodities like Jim Rogers? Then consider investing in Potash Corp./Saskatchewan (TSX:POT)(NYSE:POT) and Agrium Inc. (TSX:AGU)(NYSE:AGU).

The Motley Fool

Legendary commodities investor Jim Rogers is holding onto his long-term view that commodities prices will appreciate, even though he sees the potential for near-term pressure, which could include gold falling below $1,000 per ounce.

So, where is the investor putting his money right now? According to a recent interview he is most bullish on agricultural commodities, supported by the fact that we have a growing population and the arable land necessary to grow the crops to feed the world’s population is decreasing.

In Canada, our top agricultural names include Potash Corp./Saskatchewan (TSX: POT)(NYSE: POT) and Agrium Inc. (TSX: AGU)(NYSE: AGU), and here is how an investment in either would offer you exposure to the global agriculture market.

Potash Corp./Saskatchewan

Potash Corp. produces the three major types of fertilizers — potash, phosphate, and nitrogen — but over 50% of its business is in its namesake nutrient, potash. Its large exposure to potash is a definite positive for this agriculture-related stock. While potash ranks third in fertilizer use behind nitrogen and phosphate, the potash mining business has significant barriers to entry. Potash mines are expensive to build, and have a very long ramp-up time. The benefit of the potash business is once you are in, you enjoy better margins compared to other fertilizer mines.  

Potash ranks last in terms of global fertilizer use, partly because developing countries that use the most fertilizer grow primarily the staple grains, and the staple grains require more nitrogen and phosphate compared to potash. As the populations in these countries grow not only in size, but in wealth, the larger, wealthier class will demand a more sophisticated diet, which includes more meat as well as fruit and vegetables, and these crops require more potash for fertilizer compared to the grains.

Buy purchasing Potash Corp. stock you would be making a bet primarily on the future of potash, and while the short-term pricing for this commodity can be quite volatile, its hard to argue with the long-term potential for potash prices to appreciate as the world’s population grows, and increases in wealth.

Agrium Inc.

Agrium is a more diverse play than Potash Corp. when it comes to the agriculture sector, partly due to the company’s retail business, which is somewhat recently acquired from Viterra. The company’s retail business sells seeds, agricultural crop protection and fertilizers directly to farmers in North and South America. In addition to the retail business, the company also has a wholesale business.The company’s retail business is largely seen as a positive, and has added diversity, and stability to the company.

The main negatives brought up in terms of Agrium’s business is its exposure to nitrogen. While nitrogen is a necessary crop nutrient the negative is that the nitrogen business is more competitive, and the competitiveness can cause some challenges for Agrium’s growth.

Which to buy?

If you are looking at buying either Potash Corp. or Agrium, which stock is best for you depends on what you are looking at getting out of your investment. Over the long term I expect to see Potash Corp. outperform Agrium due to its higher exposure to potash, but Potash Corp.’s stock will likely see much more volatility.

In sum, either company offers an exposure to agriculture, a sector with a great long-term picture, so if you are looking at investing in a company that will provide solid profits, you really cannot go wrong with either Potash Corp. or Agrium.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Leia Klingel owns shares of PotashCorp. The Motley Fool owns shares of PotashCorp. Agrium is a recommendation of Stock Advisor Canada.

More on Investing

Canadian Dollars
Stocks for Beginners

3 Stocks to Invest $30,000 in Right Now

Are you looking for some of the best stocks to invest in right now? Here's a trio that offer growth…

Read more »

Businessmen teamwork brainstorming meeting.
Dividend Stocks

1 Magnificent Dividend Stock Down 15% to Buy and Hold Forever

Enbridge is off the 12-month lows but still trades at a large discount to its 2022 high.

Read more »

Male IT Specialist Holds Laptop and Discusses Work with Female Server Technician. They're Standing in Data Center, Rack Server Cabinet with Cloud Server Icon and Visualization
Tech Stocks

Missed Out on NVIDIA? My Best Growth Stock Pick to Buy and Hold

A TSX growth stock is a top pick and profitable investment choice if you missed out on the ascent of…

Read more »

Increasing yield
Dividend Stocks

My Top 5 Ultra-High-Yield Dividend Stocks to Buy in May

If you’re looking to build a passive-income stream, these five dividend stocks should be on your radar.

Read more »

tsx today
Stock Market

TSX Today: What to Watch for in Stocks on Friday, May 24

The main TSX index seems on track to end the week in the red as it currently trades with 1.2%…

Read more »

consider the options
Bank Stocks

Is TD Bank Stock the Best Bank Stock for You?

TD Bank stock is reflecting a lot of the negative news. It remains a top bank stock trading at attractive…

Read more »

Payday ringed on a calendar
Dividend Stocks

A 10.6% Dividend Stock That Provides Monthly Cash Payments

A dividend stock with a mouth-watering yield providing monthly cash flow streams.

Read more »

Businessman holding AI cloud
Tech Stocks

Ready to Invest in Artificial Intelligence (AI)? 2 Stocks That Are Solid Bets

These two AI stocks provide investors with strong future opportunities as AI continues to become a part of our everyday…

Read more »