PotashCorp (POT.TO)

Believes in the story longer-term in the agricultural theme business. Just getting through their big CapX program. If potash prices recover, which he thinks they will over time, they’ll have a lot of free cash flow with nowhere to spend and the hope is to give it back to shareholders. Have increased their dividend substantially in the last couple of years and have bought back shares. Yield of 4.5%.

(Market Call Minute) Too much risk considering where potash could still go down another hundred dollars.

The period of seasonal strength, runs from the latter part of summer, all the way through to the end of the year. Chart shows that it had a bottom in July and has rebounded from there although it has not closed the gap from when it plunged. Seasonal strength is still running. Relative Strength is flat. If there are better ways to take advantage of the agricultural sector, he would suggest you go that direction. He uses the Market Vectors Agribusiness ETF (MOO-N).

$30 would be a decent entry point. This has been a very disappointing stock, a lot of it because of the Belarus and Russian problems. If this was resolved, this would be a very good Buy but there are political unanswerable questions.

It would still have to come down further for him to be interested. Corn came down 45% recently. Farmers may not be as likely to buy more inputs. He would be interested under $15 but would then have to look carefully at the balance sheet.

Prefers Agrium (AGU-T) because you get the retail side, phosphate and nitrogen as well as potash. Potash had a disruption from the Belarusians. This is very hard to discount and know what is going to go on. If you have to go for a potash play, he would go to Mosaid (MOS-N) because they just did a bond issue and starting Nov 26, they are going to buy back between $3-$4 billion worth of shares. He also thinks they are a takeover target.

A lot of patience will be required with this one in order to generate a return, particularly over the next year or so. There are a lot of strange things going on in the fertilizer market, particularly with potash. A Russian cartel decided to break up the cartel and essentially sacrificed price for volume. Longer-term, people are going to eat more and require additional protein. If you have a five-year horizon, you will probably see the market come back. If you want to be in this space, he would switch to Agrium (AGU-T).

A lot of people like this down at these levels, because it looks so depressed. Potash prices have been under pressure. There has been the breakup of the cartel in Russia, which has impacted the prices. Longer-term, he expects potash prices will come back. Prefers Agrium (AGU-T).

Prefers AGU-T. Warming up to POT. There has been price weakness partly because of the Cartel break up and partly because of devaluation of Indian currency. The last time potash was this low in India, there was huge demand in both China and India and they have not put enough on their fields in recent years.

This thing has been hammered but the company is in reasonably good shape and is a cash flow generator. These guys have spent a lot of money building capacity, generated a lot of cash and now they are returning some to shareholders. There are a lot of other companies that are more worried about the price of potash than these guys. Russia will settle over time.

The sector is almost unknowable. This one pre-announced down earnings last week. If you look at model price charts, this one is perfectly positioned. If there is resolution in the Russian thing, look for $44.85 but if it gets nasty, look for $25.97. It is at EBV+4, it is perfectly priced. If it pulls back to $26 it would be a fantastic opportunity.

Technically, the long-term trend in this one is not your friend. However, it has strong seasonality. Best period of seasonal strength is from the end of September until the end of the year. Technically 1) stock is starting to form a bit of a base and a little upward trend (despite the really bad news that came out today) 2) it is underperforming the Toronto market and 3) it broke down through its 20 day moving average. This gives you a technical score of 1 out of 3 and you want at least 1.5 to 2 in order to go into a trade like this. Wait for this to confirm its weakness in the next few days.

Had a big surprise a few months ago when the large Russian potash producer pulled out of their joint marketing venture. Potash has been sold by 2 cartels in the world. The breaking up of the Eastern European cartel is quite negative for potash prices and for this company. They are going to be suffering over the next couple of years. If the earnings truly take a dip next year, he may look at taking some on.

Basically just potash. Because of Russia issue, he is not a buyer.

The problem with this whole space is that it is a 90% political situation right now. Very difficult to know what to do when prices are being set by various monopolies and regions. This needs to confirm a trend up before doing anything.