Nutrien Ltd. (NTR.TO)

The merger of AGU-T and POT-T. It is on his radar He thinks the valuation is pretty good. The outlook for the company is pretty good. He would not be surprised if he bought it at some point.

It does not have enough track record to show what it can do as a combined entity. It is okay on price momentum and valuation. He does not mind taking a pass on it.

It's on his "bench." It's a difficult, volatile market to be in (fertilizer). The name doesn't have enough pull for him to buy, though he's watching it. Population growth should be a tailwind, but the stock price is too high.

He owns and likes this name. This is now the world’s largest crop nutrient player after the merger of Agrium and Potash Corp. Domestically it is the largest materials company in Canada. It is a must own name for domestic portfolio managers. He believes the nutrient market is at its cyclical lows. There are $500 million in annual cost savings with the merger.

Massive agricultural supplier. He is looking at it to buy. The issue is that the commodities they sell are under price pressure. Potash, that is the biggest part of the business, is interesting because goes through these periods that are great but now they have to fight for market share. There might be some stabilization now. One great business to keep an eye on.

He does not know much of this one as it does not rank highly in their database. The challenge is earnings are down 53% on a combined basis. Their upcoming earnings in April are expected to be down another 39% from last year and with a P/E above 21 times it looks expected. Free cash flow is marginal at 1%. He sees better opportunity elsewhere.

Some Canadian agriculture stocks have been challenged by oversupply. Likes Nurtrien for its merger between Agrium and Potash. They make fertilizer. They'll probably sell off $4-5 billion of assets. Likes this stock and will hold it for at least five years.

Most people will concede that the agricultural commodities market is in a state of oversupply right now. Most evident in potash. This is the combination of Potash and Agrium. The merge will create value as synergies is in the order of 500 million dollars. Commodities prices will come back up and valuation is very attractive at these levels. (Analysts’ price target is $73)

Synergies with the merger surpassing 500 million. Fertilizer prices continue to rise. He models 25% earnings growth. 7% dividend growth. Trades at a reasonable 15.6 times 2019 earnings. Could be a double in the next two years. (Analysts’ price target is $72.52)

He is looking at getting back into it. They are generating excessive significant cash flow. A lot of cash is going to go back into dividend growth and share buybacks. This is THE defecto play on nutrient fertilizers in Canada.

One of the interesting things to think about is that you have a commodity producer (Potash) together with a retail business (Agrium), and the combined entities are around $50 billion, a sizable player from a commodity company point of view. We are in a relatively low pricing cycle for potash, but looking forward, global demands are going to push the stock higher further on. There is some merit in looking at the story.

He used to be an Agrium shareholder, but when the proposed merger came up with Potash, he decided to Sell. Now that the 2 of them are together, they are a more formidable global competitor, but the price looks fairly expensive. Also, there has been a lot of surplus in harvests, etc., and that may mean less of a demand for fertilizers in the short period.

An analyst at Scotia has this as a Top pick, and thinks it should be owned and part of a portfolio. However, he is a little shy on the cyclicals commodity complex, but while doing his reading, this stock was popping up everywhere. He is now considering adding this.

Corn can be used to make oil or feed cattle, so corn prices are not what they used to be. It was as high as $8, but with oil prices coming back it has dropped. There is less incentive for farmers to lay nitrogen to increase production. Also, there is excess capacity in potash. He worries about this, because you can't forecast in the longer sense.

This was an Agrium (AGU-T) and Potash (POT-T) merger. Together it is a much better business than either of them on their own. Agrium has a great retail business. The combined entity is still a little expensive, and he would like to get it cheaper.