Terra Nitrogen Co. LP (TNH-N)

He has been panning all the pure nitrogen producers. This one is very volatile. They cut the distribution. The hurricane is going to take some fall application away from Texas, but it probably won’t move the needle for this company. He’d cut your losses.

Seasonally agriculture stocks, fertilizers in particular, tend to do well in the summer. We are now out of that period of seasonal strength, so the wind is no longer at your back. Looking at the charts however, over the past year it has really been bouncing between $94 and $118. Those are your limits. The trading range has allowed you to be nimble enough to take advantage of the swings. It did gap lower at the beginning of February, he would guess following earnings, so it has created a large gap at $110, so be very hesitant about expecting it to get to the $118 again.

This is a deeper value play where you are betting on the lower natural gas price. They are better for a bigger company who passes increases from here on to customers. Nitrogen based fertilizers will do well and he prefers them to potash. This is an MLP.

He is very constructive on agriculture. There is strong evidence that we are moving from an El Niño period to an El Niña, where the water on the Pacific equator is getting colder, not warmer. That changes weather patterns, which means hotter summers, colder winters and changes agriculture. Soya has gone through the roof because people have been positioning for this. In the last cycle, a lot of people bought potash and nitrogen, because of the supply/demand imbalance and the constraints that existed. That no longer exists. Nitrogen is made out of natural gas of which there is a plethora of in the US. This company had a bad quarter and they cut their distribution. The distribution is very high and he would question the sustainability of it. 8.8% dividend yield.

(A Top Pick Jan 22/13. Down 8.67%.) Nitrogen, base fertilizer, as opposed to potash-based names. Nitrogen applications increased in the spring and will continue to increase. We have gone from cooler/wetter weather in North America to now being dried up in the last 5-6 weeks. Whenever you get lower yield in corn forecasts, applications for nitrogen-based fertilizers are going to go up.

Fertilizer. More of a tactical trade because there is volatility. Structurally it is a master limited partnership but looking at the underlying cash flows it is tied to nitrogen-based fertilizers. Because of cheap cost of gas input you’ll see applications grow, contracts grow, applications of fertilizers vis-à-vis nitrogen-based fertilizers highs scalable and attractive. Tactically you can pick this one up on the cheap and trade around positions within a 6 to 12 month period. EPS is $16.32.