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3 Stocks Near 52-Week Lows Worth a Look

The past year or so has been a roller-coaster ride for the fertilizer industry. From sky-high fertilizer prices and rocketing profits to a fertilizer "bubble" scare and disappointing numbers, it has seen it all. The situation right now is such that although the U.S. Department of Agriculture is predicting record plantations for some essential crops (read: corn), investors seem wary. The faith -- or lack thereof -- is evident in the recent slide in prices of fertilizer stocks.

But the fundamentals of this industry are intact, and I actually feel these lows could be looked upon as great opportunities. Here are three fertilizer stocks that are dangerously close to their 52-week lows and could be worth watching.

PotashCorp (NYSE: POT  )
Its first quarter wasn't a great one as demand weakened, but PotashCorp knew this was coming. Cautious buyer behavior had compelled both PotashCorp and peer Mosaic (NYSE: MOS  ) to cut back potash production during the first half of this year. Are things still that bad? I don't think so.

For one, neither of the companies has announced any further cuts. Two, potash demand is picking up. Corn plantation in the U.S. is in full swing, and contracts are pouring in for Canpotex, the three-member legal cartel in which PotashCorp is the largest stakeholder.

The company itself has shown solid growth in recent times. Its revenue and net income grew at an average annual rate of 33.8% and 59.4%, respectively, over the past two years. The world's largest fertilizer maker also sports an impressive return on equity of 36.6% over the past year. Fears of low crop prices and demand for potash have pulled PotashCorp's stock down. A trailing P/E of 12.1 might seem to be at the higher end of the spectrum when compared to peers, but a forward P/E of just 10.2 should put away concerns.

Also a part of Canpotex, Mosaic must be looking forward to a great 2013 after winning two litigations recently. Benefits include increasing internal input production (which should cut costs considerably), having more potash in hand to sell to outside customers, and the right to export millions of additional tonnes via Canpotex.

These factors should help Mosaic grow bigger. Its top and bottom lines grew at impressive average annual rates of 31% and 89.4%, respectively, over the past two years. Mosaic's return on equity stands at 18.2%, and it also raised its dividend recently. At a trailing P/E of 12, the stock looks pretty reasonable. The good part is that both Potash and Mosaic are trading at around 10 times forward earnings. And the forward P/E for both is lower than their trailing P/Es.

Intrepid Potash (NYSE: IPI  )
Here's another potash player that has seen its stock slip nearly 17% year to date. The company might not have enjoyed as much attention as bigger counterparts, but do you know that Intrepid is the largest potash producer in the U.S.? The company performed better than both PotashCorp and Mosaic in its last quarter. One reason, as I had mentioned in an earlier article, could be its location advantage, which translates into lower transportation costs.

Over the past two years, Intrepid's revenue grew at an average rate of 20%, while its net income grew at a 54.7% clip. The company is almost debt-free, and it sports a return on equity of 12.1%. Its trailing P/E of 14.1 is in line with that of its peers. As in the case of others, a lower forward P/E (12.1) indicates some potential upside.

A fact you can't ignore
If you have noticed, all three deal primarily in potash and phosphate -- which is probably why their stocks were hammered. Had they been more nitrogen-centric, like CF Industries (NYSE: CF  ) or Agrium (NYSE: AGU  ) , it would be a different story altogether. Not only have CF and Agrium operationally performed better than companies mentioned above in recent times, but their stocks gained 8% each year to date. Why? Because nitrogen is the most essential nutrient for crops and is produced using cheap natural gas. Furthermore, its demand graph has been much better than that of others in the past.

But that doesn't mean we can sideline companies such as PotashCorp, Mosaic, or Intrepid. They're big, and they deal in nutrients that are critical for crop production. PotashCorp even derives a good chunk of revenue from nitrogen. The fact that fertilizers will be required as long as the world needs food makes these companies hard to ignore.

The Foolish bottom line
Fifty-two-week lows provide a great opportunity to evaluate a company and see if its stock actually deserves the punishment and whether there's an underlying opportunity. All three companies I mentioned are investing in big expansion programs, which is a clear sign of long-term promise. Keep tracking them by adding them to your personalized stock watchlist.

In the meantime, take a look at the company our chief investment officer has dubbed the "Costco of Latin America" in this special report, "The Motley Fool's Top Stock for 2012." Best of all, this report is completely free, so don't miss out!

Neha Chamaria does not own shares of any of the companies mentioned in this article. The Motley Fool owns shares of CF Industries Holdings. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

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