PotashCorp (POT.TO)

The stock remains fairly expensive from a historical point of view. Feels it is reluctant to get down to levels that he would consider would be fairly cheap. Because of this, he is not very interested. Running into fairly stiff resistance at about $43-$44 for almost 2 years, and he expects it is going to do the same thing again. Earnings momentum is fundamentally flat. Feels it has about 10% more upside.

Stock has been working its way higher over the last 8-10 months now. You want to be a little bit careful because prices of both wheat and corn have been weakening. Stock has pulled back into some support at the 50-75 day moving averages. If you like this, this is where you would add to it. Doesn’t feel this would be his number 1 sector

(A Top Pick June 3/13. Down 5.74%.) Sees tremendous ability for them to increase dividends. Their CapX falls off significantly after this year because they have done a major mine expansion in Saskatchewan. Even though potash prices have come down, they are still making a good amount of free cash flow, and the dividend can rise. You are getting paid almost 4% while you wait. Still likes.

Stock has had a pretty good move. There are competitive problems. There is no shortage of potash globally. The Chinese and Indians, who are major consumers of potash, have been quite circumspect in terms of when and how much they are prepared to pay. BHP Billiton (BHP-N) owns an enormous amount of land all around this company’s lands in Saskatchewan, and have the balance sheet that they could put a lot of pressure on the company should they choose. Thinks it is still trading at a premium valuation.

His current Top Pick in this area is Agrium (AGU-T), but there are some very good reasons to consider continuing to Hold Potash. The election of India’s new Prime Minister could very well change the whole agricultural subsidy system there. This could open up a huge demand for potash. Certainly nitrogen, phosphate, etc. This company suffered the worst decline in price last year when India was out of the market and China was playing games. He is looking at this one.

The long term picture is probably okay for them. It is slowly grinding higher. The stock is at a pretty expensive level.

Short? He has been somewhat bearish to neutral on fertilizer stocks. This one is a premium potash producer. Potash prices were unsustainably high and it took the defection of one of the cartel members to pull it down. At this level, he is pretty neutral on it because of farmers’ income, although not great right now, do have a lot of grain they can sell. Doesn’t see a huge amount of upside on the stock, but also doesn’t see much downside. Dividend yield is pretty decent, which could be a problem for Shorting. More of a sideways trading range right now.

Still looks attractive on a technical basis. Seasonal strength is October to December. Less consistent last couple of years. This year the sector is quite mixed. It is in an upward trend. AGU broke its key support level yesterday. He would wait until end of June before adding more.

Potash and fertilizers have had their troubles this year, whether they’ve been phosphates, nitrates or potash. Prefers Agrium (AGU-T) because it is a little bit more balanced. Besides fertilizers, it is also involved on the retail side. On a multiple basis, this still looks a little expensive to him.

Had a nice little lift off the bottom. There were very few buyers of potash last year and they really have to come back and replenish some of the inventories. There have been pretty decent buying levels in the 1^st half of this year. It now looks like it may have been overbought and may tread water. Wait to see how the back half unrolls. China is supposed to be a buyer. She owns Agriun (AGU-T) instead.

This didn’t have a lot of love last year, but has started to have a little bit more love now. Has had a nice move since the fall. Probably not something that he will be rotating into anytime soon. He prefers Agrium (AGU-T) which he doesn’t own.

[Caller wanted to Short this one] You bought into a lot of brokers that think the stock will be $30 or below. Potash is finally firming up. You’ve seen the worst of Potash prices. He prefers one of his Top Picks today.

There are rumours of a takeover by BHP which he was surprised to read, after the last time around. He does not like to buy a stock based on the possibility that there might be a takeover bid. If there was a takeover bid, it would go for much higher share price than what it is currently trading at.

Fertilizer stocks tend to do well in the summer, from July through until October. We are currently already seeing strength in the stock. Last year was a horrible year and it didn’t play out according to trend. He would expect that this will get up to those highs that we saw last summer. Sit this one out now and entertain it more in July.

Expect they will hold their dividend, but he would not expect any dividend increases for a while. Just spent $8.3 billion in expansion in capacity that the world really doesn’t need at this point. Not overly optimistic of potash in general. There has been flattish demand globally. He is Short this, but the reason is for hedging. He thinks Mosaic (MOS-N) is a more attractive player which has about $3 billion of corporate buybacks that will be taking place this year.