Can These Stocks Bounce Back?

However hard the market slams a stock, there's always the chance it'll come bouncing right back. We'll consult our Motley Fool CAPS community to find shares on the rebound, examining one specific sector of the economy in search of companies with rising CAPS ratings.          

There are 88 stocks listed under "chemicals" in the CAPS' screener, but only more than a handful of them carry well-respected four- and five-star ratings. Those accolades mean our 180,000 CAPS members are confident that these stocks will beat the market in the months ahead. Let's see what members are saying about the ones below:

Source: Motley Fool CAPS; Yahoo! Finance; NA = not available; CVR IPO'd April 7, 2011.

International and financial worries are again gripping the market, but with the S&P 500 still up 9% over the last 12 months, it might be surprising to learn that the CAPS fertilizer stocks have done well, too. So let's take a closer look at why investors think some of these other companies won't be jumping from the frying pan into the fire now that the markets are roiled again.

Some spring in its step
Nitrogen, phosphorous, and potassium -- known by their symbols, N-P-K --comprise the three major ingredients in today's fertilizers. Next time you buy a bag for your lawn, notice that the three numbers on the front represent each of these components.

While Scotts Miracle-Gro makes a fine living selling to the homeowner, the real money is found in commercial agribusiness, and there you'll find Mosaic, PotashCorp, and CVR Partners, a pure-play nitrogen company.

Spun off from CVR Energy (NYSE: CVI) earlier this year, CVR utilizes petroleum coke purchased from its former parent to make its fertilizer, the only company in North America to do so. Thus, as a fertilizer producer it competes against Mosaic, PotashCorp, and CF Industries (NYSE: CF), but it has a competitive advantage since pet coke, the feedstock it uses to make nitrogen, is historically much cheaper than the natural gas used by rivals. And since it has a long-term supply contract with CVR Energy (it runs until 2027), that's a cost advantage not about to abate anytime soon, even as natural gas currently remains relatively low-priced.

CAPS member LegendPhoenix also thinks investors will benefit from the company being a master limited partnership: "But more importantly, to qualify for their special tax treatment, they have to pass most of their income on to unit holders. I'd buy CVR Partners just for their commitment to growth, the proximity to their customers and their massive cash distributions -- but with a buy-and-hold strategy, I'm curious to see what happens when their competition has to raise fertilizer prices if natural gas were to get more expensive."

Let us know on the CVR Partners CAPS page whether you think the fertilizer maker can continue to grow profits.

Seeing clearly
Mosaic and PotashCorp are more traditional potash producers, being No. 3 and No. 1, respectively, in the space. With demand for food soaring, the need for their fertilizer is soaring as well. Mosaic's recent earnings results beat analyst expectations as revenues soared 54% from the year-ago period. PotashCorp also beat Wall Street earnings forecasts by better than 10%, and analysts are looking for the current quarter's profits to double.

But this is a fairly common refrain we're hearing from fertilizer shops, from Agrium (NYSE: AGU) to Syngenta (NYSE: SYT), so with stable financials coming out of Mosaic, we're likely to see the trend continue.

CAPS member MagicUKW says that with no letup in sight in the demand for food, fertilizer companies like Mosaic will continue producing bumper crops for investors.

The company is acting in the same industry as potash and is also generating billions of profits. It seems as if the industry is soaring up and having great people working in a future industry. More food is needed, therefore more animals are needed, therefore more potash is needed.

Similarly, the CAPS community is solidly behind PotashCorp, with more than 4,700 members weighing in on the big name in fertilizer; 96% say it will go on to beat the broad indexes (and 97% of 1,200 All-Stars agree).

Let us know your views on fertilizer's future on the PotashCorp CAPS page. You can also keep track of PotashCorp's developments by adding the stock to your watchlist.

The ball's in your court
There are many factors that go into whether a stock is a buy or sell, so it pays to start your own research on these stocks on Motley Fool CAPS. Read a company's financial reports, scrutinize key data and charts, and examine the comments your fellow investors have made, all from a stock's CAPS page. Head over to CAPS today and share your thoughts with other investor analysts on whether you think these stocks are ready to bound higher.