Despite a gain of more than 10% in the S&P 500 over the past three months, there's still a real buying opportunity in growth stocks: Our 10 best for 2011 are expected to bolster their profits an average of 61% next year -- vs. 14% for the S&P -- and yet they trade at an average 12 times next year's earnings, vs. 13 times for the S&P.
Our selections this year are slanted toward commodities. Exposure to oil, chemicals, and fertilizer should provide protection against a falling dollar or an outbreak of a 1970s-style rise in inflation, which we think is a bigger threat than a double-dip recession. (We've also made some contrarian selections, including one housing-related stock.)
As corn goes, so go the makers of fertilizer. That's good news for Mosaic, whose stock has had an 89% correlation with corn prices (if 100% means mirroring them exactly) during the past five years, according to SIG Susquehanna agriculture analyst Don Carson. The price of corn has jumped 25% over the last 12 months, and inventories are at their lowest since 1995. The reason: Heavy rains and scorching heat caused the2010 harvest to decline 4% from 2009 -- even as demand rose, with ethanol now consuming 41% of the U.S. corn crop and growing wealth in developing countries leading to increased food consumption.
Mosaic is up only 11% for the year, which means it has some catching up to do. And with analysts expecting a 48% earnings rise in 2011, the stock (which trades at 15.4 times those estimated profits) seems primed to flourish. (more)
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