Whatever Happened to...The Other Fertilizer ETF? (MOO, POT, SOIL)
When it comes to ETFs that track stocks such as Agrium (NYSE: AGU), Mosaic (NYSE: MOS) and Potash Corp. of Saskatchewan (NYSE: POT), the conversation typically drifts to one fund: The Market Vectors Agribusiness ETF (NYSE: MOO).
The Market Vectors Agribusiness has been around almost five years and in that time the fund has faced some competition but those pretenders to the throne have wilted.
Except for one that is, that found being the Global X Fertilizers/Potash ETF (NYSE: SOIL). There is an important difference between these two ETFs. MOO does not exclusively focus on fertilizer producers. The Global X Fertilizers/Potash ETF does. SOIL came to market last year as part of Global X's "four F's of the food chain" suite of ETFs. Today, SOIL is the only of that quartet that remains.
Unbeknownst to a lot of investors, SOIL has not only survived, but thrived. The 25-stock ETF has accumulated over $29.3 million in assets under management since its May 2011 debut and average daily volume is north of 32,100 shares. Rounding SOIL's most recent closing price up a few pennies to $14 means the fund has average weekly dollar volume in excess of $2.2 million shares. In other words, SOIL probably isn't headed to the ETF graveyard anytime soon.
SOIL's concentration on fertilizer issues has served the ETF well in 2012. The return to the high beta trade has been good news for the likes of Agrium, Potash and CF Industries (NYSE: CF). That's helped MOO to a nice year-to-date gain. That trend has also helped SOIL outperform its larger rival.
The new iShares MSCI Global Agriculture Producers Fund (NYSE: VEGI) hasn't been able to hold a candle to either MOO or SOIL and VEGI is easily trumped by SOIL when it comes to assets and liquidity. VEGI's top-10 holdings represent almost 58% of that fund's while MOO's top-10 stocks account for about 56% of its weight. SOIL is slightly more diverse with its top-10 lineup representing almost 54% of its total weight.
SOIL might also be benefiting from its global exposure. The U.S. and Canada combine for about 38% of the fund's country weight, which is to be expected with a farm/fertilizer ETF. Beyond that, SOIL offers exposure to a dozen more countries, six developed markets and six emerging markets. In order, Israel, Australia and China round out SOIL's top-five country weights.
The fundamental story behind ETFs like SOIL and MOO is well documented at this point. It goes something like this: The world's population will soon outpace farmers' ability to produce food and those looking to profit from that dire situation would do well to buyer fertilizer stocks, or in this case, ETFs.
With that scenario known, looking at SOIKL's technicals is worth a few minutes of one's times. If the ETF, which has an RSI that is NOT sporting an oversold condition, can break resistance around $14.20, there is no more material resistance until just over $16. On the downside, support looks firm around $13.25 and as long as high beta is in style, SOIL should sprout higher.
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