Why Is Archer-Daniels-Midland Company (ADM) the Best Potash Stock to Buy Now?

We recently compiled a list of the 10 Best Potash Stocks to Buy. In this article, we are going to take a look at where Archer-Daniels-Midland Company (NSYE:ADM) stands against the other potash stocks.

Global Potash Market: Rising Demand, Key Players, and Future Growth Projections

Potash encompasses various minerals rich in potassium, primarily potassium chloride (muriate of potash), which dominates the global market. Other compounds like sulfate of potash make up the remainder of the market. As the world's population is expected to reach over 9.7 billion by 2050, the need for potash-based fertilizers will only continue to rise.

The agricultural sector uses more than 95% of the world's potash production, with the remainder going toward commercial and industrial goods like detergents. The US Geological Survey states that historically, a third of the world's potash supply has come from Russia and Belarus combined.

In addition to phosphate and nitrogen, potash is necessary for crop health and is vital for plant growth. However, intensive farming depletes potash reserves, making synthetic fertilizers necessary. Potash prices skyrocketed as a result of the conflict between Russia and Ukraine, reaching a high of over $1200 per metric ton in April 2022 before falling to $328 per metric ton, which is still more than pre-Covid levels. As a result, nations like the US, Brazil, and Morocco have looked for substitute suppliers to lessen their dependency on Belarus and Russia. Grants have also been issued by the US to increase regional fertilizer production. You can also see our post on the top fertilizer stocks to purchase based on hedge funds' 10 Best Fertilizer Stocks to Buy According to Hedge Funds for further information.

The global potash market was valued at USD 57.74 billion in 2022 and is expected to grow at a CAGR of 4.9% from 2023 to 2032, reaching USD 93.50 billion by 2032. The potassium chloride product segment dominated the market with a revenue share of 52.7% in 2022, driven by the surge in agricultural activities. The top 15 national fertilizer markets consume 78% of global potash, while 133 countries consume only 5%. Major players in the potash market include JSC Belaruskali, Compass Minerals, Mosaic Company, Uralkali, and Rio Tinto.

Our Methodology 

To rank the 10 best potash stocks, we first conducted sampling, and gathered potash stocks from relevant ETFs. We the narrowed down further based on high upside potential, strong buy analyst recommendations, and large market capitalizations. From this list, we then ranked the top 10 potash stocks according to the number of hedge fund holders in Q1 2024.

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter's strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).

A wheat field at sunset, showing the company's commitment to agricultural commodities.

Archer-Daniels-Midland Company (NSYE:ADM)

Number of Hedge Fund Holders: 40 

Archer-Daniels-Midland Company (NYSE:ADM) is a leading global agricultural company that processes and trades agricultural commodities, providing food ingredients, animal feeds, and biofuels.

ADM's core business segments, including agricultural and metal commodities, are poised to benefit from favorable market conditions in late 2024. Commodities typically perform well during inflation, and lower interest rates plus a weaker dollar make them more attractive globally. ADM is expanding direct-to-farmer buying and enhancing its nutritional segment to capitalize on higher commodity prices. The company has shown resilience, posting solid quarterly earnings above consensus for the fifteenth consecutive quarter and raising its dividend. With a 10% YoY EPS growth, ADM is attractively valued, offering nearly 20% upside potential based on DDM and P/E ratio analysis, and trades below its 5-year average valuation ratios.

In Q1 2024, there were 40 hedge fund holders in Archer-Daniels-Midland Company (NYSE:ADM). D E Shaw held the largest position in the company with 4,132,861 worth $259,585,000, comprising 0.225 of the company’s total portfolio. The company’s adjusted earnings per share (EPS) in Q1 2024 was $1.46, surpassing the analyst estimate of $1.36 per share, which represents a $0.20 per share increase compared to the prior year, driven by volume improvements in the Ag Services & Oilseeds (AS&O) segment. Their segment operating profit was $1,311 million on a reported basis and $1,317 million on an adjusted basis, a 24% decrease compared to the prior year.

Overall ADM ranks 1st on our list of the best potash stocks to buy. You can visit 10 Best Potash Stocks to Buy to see the other potash stocks that are on hedge funds’ radar. While we acknowledge the potential of ADM as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than ADM but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

 

READ NEXT: Analyst Sees a New $25 Billion “Opportunity” for NVIDIA and Jim Cramer is Recommending These 10 Stocks in June.

 

Disclosure: None. This article is originally published at Insider Monkey.