Agrium (AGU.TO)

(A Top Pick April 27/15. Up 4.73%.) The problem in the short term is that they are being taken to the cleaners in the Potash (POT-T) merger. Feels shareholders have to go ahead with this deal holding their nose. It’s a bad deal in the short term. Looking at the whole seed and insecticide area, there are all kinds of mergers going on, and you have to stay big to compete with the big boys. He still likes this.

If this merges with Potash (POT-T), they say there will be considerable synergies. One of the real benefits with this company is it has the retail franchise, so hasn’t been exposed to depressed fertilizer prices. If they partner with Potash they are going to start to experience that. The short-term outlook for the combined entity is probably negative.

There is certainly smoke and speculation around this. He wouldn’t want to buy this just because he thought there was a deal. That is not a great reason. Grain markets have been very weak. When you look at the Potash (POT-T) chart, it has been very, very sloppy, and Agrium isn’t any better. Looking at the group, he feels there are better things to do.

This is involved with a merger with Potash (POT-T), which is going to have a big influence in the next little while. Technically it is on an upward trend. The important thing is seasonality, which tends to bottom around the end of September and moves higher through until the 1^st week in January. We are just moving into a period of seasonal strength.

Potash (POT-T) or Agrium (AGU-T), or wait? He would wait and let the dust settle. In general terms, it is a good idea. There will be a consolidation and there will be lots of savings and lots of synergies. What you don’t know is what the consolidated situation is going to look like, and how many shares you are going to get.

Agrium’s jewel is their retail division. The thesis has always been, spin that off as a separate company to give you a huge valuation. Agrium felt they needed the 2 companies together. Now they are looking to merge with Potash (POT-T) and get more into the commodity business instead of the retail business.

(Market Call Minute.) The fertilizer cycle is still a couple of years away.

(Market Call Minute.) It looks like corn and other commodities are turning down. There is a need for increased food production globally on a longer-term basis, but if it turns out that the farmers don’t have the cash in their jeans to be able to afford it, he would be cautious in the near term on all fertilizer stocks.

(A Top Pick June 22/15. Down 5.03%.) The impact of BREXIT is quite neutral on this.

In the long-term, people have to eat, and taking a look at projected population growth people are going to need more food, especially in emerging markets. He likes that they have diversified into the retail business and have some pretty aggressive targets on this. The target for 2020 is $10 a share of free cash flow and a dividend of 5%. For him, cash flow growth and dividend growth is crucial. (On his 3 top picks, he would not necessarily Buy now, but watch the markets for your entry point.)

(A Top Pick April 27/15. Down 9.41%.) The long-term thesis is that the growth in the world’s population is going to be in emerging markets. Both growth and demographics are very much in their favour. You have a younger population becoming wealthier which will probably want to improve their diet and eat more protein. Also, there is a drought in Brazil. China and India could double their fertilizer applications. The retail business is their crown jewel. You are looking at free cash flow, even after dividends, of $4 to $7 for the next couple of years.

Nitrogen prices have been soft. He sees a 20% decline in earnings this year. It tends to be over-owned and then becomes oversold when other places for money look brighter. He thinks you will get an opportunity to own this name lower and that you should pick away at it.

The only stock she holds in fertilizer. She likes the sector. Near term fertilizers are in some difficulty with weak crop prices and a strong US$. However, this has the retail side of their operation which makes them less cyclical. The stock has pulled back and it has a nice yield behind it. Corn crops are going to be quite high this year, which will be positive for their retail operations. In the long term demand from developing countries will come back because of a growing population. This is the name that she would own.

(Market call minute.) Grain prices are sitting near lows, agriculture stocks are underperforming, so he would avoid the group.

Has been a fan of this for years, but sold his holdings at $122. He was expecting to buy it back at under $100. The fertilizer market is not in great shape. All fertilizer stocks look fully priced at the present time.