Zacks Industry Rank Analysis Highlights: BHP,POT

Zacks Industry Rank Analysis is written by Dirk Van Dijk, CFA, Chief Equity Strategist,

This year looks like it is going to tie 2005 for being the hottest year on record, and all of the ten hottest years on record have come since 1998. One of the main effects of this has been just plain wacky weather, and weather that has had some disastrous consequences.

No industry is more dependent on the weather than agriculture. The weird weather has led to significant crop losses around the world, including the floods in Pakistan and the fires and drought in Russia.

As a result, agricultural commodity prices have been soaring. The result is much higher farm incomes for the areas that have not been hit with crop failures, most notably the U.S. If you are reading this, then you are probably more inclined to invest in equities than you are to take a flyer on soybean meal futures.

So are there any good ways to play the world food shortage through stocks? In a word, yes — and the Zacks Rank is pointing to a few areas that show great promise. Two relatively small industries, based on the number of firms, are well positioned to benefit.

The Zacks industry classifications are very fine, with 256 different industries tracked. It is not particularly noteworthy if a single small industry shows up doing well — a single firm with good news can propel a one or two firm industry to the top (or bottom) of the charts. It is interesting, however, when you see a cluster of similar industries at the top of the list. The same holds true for the bottom of the list.

The Farm Machinery industry is relatively small, with only six firms in it, but it has a few big firms in it. I should note that it is not just the Farm part of Farm Machinery that makes it look attractive; other machinery industries such as general Machinery and construction machinery are also stronger than average. However, Farm Machinery is in the number 3 spot of the 256 industries we track, slipping one spot from last week as the average Zacks Rank rose to 1.83 from 1.50.

Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.

Disclaimer: Past performance does not guarantee future results. Investors should always research companies and securities before making any investments. Nothing herein should be construed as an offer or solicitation to buy or sell any security.