So, You Want to Live as Long as Possible? Investing Here Might Prove Wise

The world needs more food and these companies are investing to ensure farmers can meet that need.

Jan 27, 2014 at 11:12AM


Photo credit: Flickr/David DeHetre

There's a major obstacle standing in the way of living a long and healthy life: food. By some estimates, the world will need to produce more food over the next 50 years than it has grown in the last 10,000 years. Challenges that great are the breeding ground of major opportunities.

The world is facing a real perfect storm of challenges in an effort to grow more food. Life expectancy is reaching new heights, which is helping population balloon. At the same time wages are rising in many nations, which is growing the middle class. As nations grow richer, so does demand for protein. Add to this the fact that arable land suitable for farming is becoming harder to come by as cities sprawl. It really makes one wonder how on earth we are going to feed everyone.

The great ag trade
There is no silver bullet. It will take advancements in seeds, increased usage of fertilizers as well as improvement in agricultural practices and methods to meet our needs. Biotech seed makers like Monsanto (NYSE:MON) will undoubtedly play some role in feeding the masses. That said, many in the world are leery of the genetically modified products companies like Monsanto are producing.

This is why a more palpable solution, and a pretty compelling investment opportunity, is instead found in fertilizers. The three most important to both farmers and investors are potash, phosphate, and nitrogen. Each will play an integral role in feeding the masses in the decades ahead.

A primer on fertilizers
Potash, which is produced by companies like PotashCorp (NYSE:POT), is important because it strengthens roots and stalks. It also aids in drought resistance through water retention. A large portion of the world's potash reserves are found in Canada, which is where PotashCorp continues to invest to grow its potash-mining capacity.


Potash mining facility in Canada. Photo credit: Flickr/Just a Prairie Boy

Phosphate, which is also produced by PotashCorp, helps speed up the maturity of plants. It's also important to increase crop yield. With farmers being expected to do more with less, increasing crop yields will be very important to meeting future needs.

Not to sound like a broken record, but nitrogen is also produced by PotashCorp, which just happens to be the most diversified of the publicly traded fertilizer producers. But nitrogen is also produced by U.S.-based companies like CF Industries (NYSE:CF), which is investing heavily to increase its capacity. Nitrogen is important to farmers as it speeds up growth and increases yield. It also keeps plants green.

What's important to know about nitrogen is that natural gas is the major feedstock used in its production. America's natural-gas boom has lowered the cost of producing nitrogen in the U.S., which is why CF Industries is investing to build its capacity to produce more nitrogen. That trend is really important to American farmers as 50% of the nitrogen currently used for fertilizer is imported. As production capacity increases American farmers won't need to pay for more expensive imports.

Investor takeaway
Fertilizer producers like PotashCorp and CF Industries are investing to ensure that the world has enough of these key crop nutrients to feed the world. Those investments will help to ensure that we can live long and healthy lives. Because of this, investors who want to add some prosperity to that long and healthy life should consider taking a closer look at investing in a fertilizer producer as these stocks should yield decades of profits.

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Matt DiLallo has the following options: long January 2015 $70 calls on Monsanto, short January 2015 $70 puts on Monsanto, and short July 2014 $105 calls on Monsanto. The Motley Fool owns shares of CF Industries Holdings and PotashCorp. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

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This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

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KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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