Among stocks in the No. 1 rated agriculture sector, Sociedad
Quimica y Minera de Chile (
) is tops in EPS Rating.
The stock carries a 96, which means its in the fourth
percentile vs. other stocks.
The company sells fertilizers and industrial chemicals in more
than 100 countries. In 2011, almost half of sales revenue was
tied to emerging markets. Only 13% of revenue was derived from
Sociedad's products are used in farming, drugs, nutrition, LCD
screens, batteries, solar energy and industrial applications.
Products are mainly derived from mineral deposits in northern
The stock is rated No. 2 in its industry group in Stock
Checkup at Investors.com. (The top stock isAgrium (
).) Generally, an investor should buy the stock that is rated
first or second within its group, assuming the group is
Chemicals-Agricultural was No. 28 among 197 industry groups,
as of Thursday's IBD.
A strong sector and industry group can add a tail wind to a
Sociedad's fundamentals are fairly strong.
Earnings increased 36% and 46% in the past two quarters.
Revenue rose 10% and 24%. The three- and five-year EPS stability
factors are 16 and 29. The stability scale runs from 0 (calm) to
Pretax margin was 34% last year, near historical highs. Return
on equity, a gauge of financial efficiency, was 32%, far above
the minimum 17% associated with elite stocks.
Sociedad's dividend has some built-in uncertainty. ADR
dividends are converted from the Chilean peso to U.S. dollars. A
strong peso increases the payout, while a strong dollar decreases
it. The current estimated annual yield is 1.3%.
Cash dividends paid to non-Chilean shareholders are subject to
a 35% withholding tax. If Sociedad has paid corporate income tax
on the income from which the dividend is paid, a credit reduces
the withholding tax.
The stock is working on a first-stage consolidation that dates
to July 2011. A long pattern can wear out weak holders.
One concern is fund support. The number of funds and total
stake dropped in the first half of this year.