Zeroing In On An Ag Stock

October 14, 2010

Lindsay Corp. has performed well lately, but is it setting up for a fall?


Reporters have spilled a lot of headline ink on agriculture stocks' bullishness after the last USDA crop estimate. Stocks such as irrigation equipment maker Lindsay Corp. (NYSE: LNN), Argentinian/Brazilian food crop producer Cresud Inc. (Nasdaq: CRESY) and Agrium Inc. (NYSE: AGU), a Canadian fertilizer manufacturer, all shot up this week, propelled by buyers' scarcity fears.

These stocks are all components of the Market Vectors Agribusiness ETF (NYSE Arca: MOO), an exchange-traded fund comprising 47 global agribusiness issues. MOO climbed 6.6 percent this week.

The jump in ag stocks improved the relative strength of the MOO portfolio vs. commodities themselves, at least those proxied by the PowerShares DB Agriculture Fund (NYSE Arca: DBA). The DBA fund's underlying index comprises 11 commodities including cattle, corn and sugar, among others.

But while ag stocks' condition may have improved, they didn't win the upper hand. MOO might have rebounded from its early-year breakdown (detailed in "Agribusiness Stocks: A Deere Friend?"), but now the stocks' relative strength vs. futures remains locked in a trading range.


Relative Strength (MOO Vs. DBA)

Relative Strength (MOO Vs. DBA)


That futures have strengthened against ag stocks isn't such a bad thing, really. After all, if futures prices turned south, commodity stocks would likely fall as well. By and large, stocks in the MOO roster are well ahead of their 50-day moving averages; some more than others.

Among MOO's actively traded U.S. stocks, the top dog is Lindsay Corp., which is 23 percent above its average now. Lindsay's share price zoomed 17 percent higher this week in the run-up to the release of the company's fiscal fourth-quarter and yearly financial results. Lindsay will announce its numbers before the opening on Oct. 20.

The actively traded issues rounding out MOO's "top four" momentum stocks are:


  • Cresud Inc. – 22 percent above its 50-day moving average
  • Darling International, Inc. (NYSE: DAR) – ahead of its average by 20 percent
  • Agrium Inc. – up nearly 17 percent


Lindsay's stock bottomed in July just under $31 and closed Wednesday at almost $50, but there's still plenty of daylight overhead before it regains its 2008 highs at the $130 level. And while a number of factors seem to point the company toward its once-lofty altitude, Lindsay is not without is millstones.

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