PotashCorp (POT.TO)

$55.83 model price, 41% upside. Over time the value of the balance sheet will bail you out. Nice dividend.

Seasonality runs from June 23 to January 11. Since 1990 it has actually been up 84% of the time and produced an average gain of 21%. Chart shows a trading range but it hasn’t done well. Currently it has bounced off the bottom of the trading range, which is very positive. Pays a good dividend and has a good technical profile.

His one-year target on this is $46 and it is possible to get to $50 in the following year. Fundamentals of this company are improving at the end of their long expansion program so free cash flow should build significantly. Recently announced an increase in the dividend of about 25% which he thinks will continue to grow. Current yield is 3.6%.

The nutrient potash seems to have been in the doldrums. Pricing is a bit better than last year but unfortunately some of the countries that are big consumers of potash have had a decline in currencies. There has to be a pickup from international buyers as well as the US.

This whole group seems to be in the holding pattern. He is still trying to figure out what the landscape is following the unusual weather patterns North America has been experiencing. Prices have softened a little bit, but probably not a bad entry point. Don’t look for anything real dramatic in the short term. Increase in natural gas price has hurt them in some of their production costs. Nice dividend.

Recent acquisition of his. He has been looking at it for a long, long time. He sees the long term ability to increase dividends to shareholders and he sees this continuing up to 8 years. They are the giant in the world. They stopped making that big acquisition boom. The rest of the world cannot add a new mine economically. 3.7% dividend.

(Market Call Minute) New mines are opening elsewhere in the world. Competition. Doesn’t like the valuation.

Great run over the last decade and tied to corn prices that might be softening. He would look for a better entry point. He follows it and would love to own it. It has all the attributes he wants – free cash flow, Global position and a growth industry. It is the cream of the crop in this space.

Just took on a small position. Some near term concerns in agri-space because of corn prices. 3.5% dividend, PE is not extremely cheap.

Normally moves higher around the third week of June until Sept, takes a break and then moves higher until the end of the year. This year it is forming a nice little base pattern. Don’t rush the trade yet. Wait until all the technicals line up. He thinks that it will happen in the next few weeks.

Potash prices were weak for a while but seems to be stabilizing a little bit. A commodity where the cost of shipping it is almost more than the commodity itself. This is not a compelling valuation. He would prefer something like Agrium (AGU-T) that is a bit more diversified.

Fertilizer companies in general have been losing altitude in valuation terms. Price to Book has been steadily coming down. This was due to the fabulous pricing power that they had, which they have never been able to regain. It turns out that more potash is being turned up everywhere you turn around in the world.

Even though commodities are under a bit of pressure in the short term, he likes it here. Technically it acts beautifully. A lot of bad news was thrown on it last year including 3 earnings misses but it didn’t break it significantly below the $40 level.

Intrigued by the dividend growth and its sustainability going forward. Their CapX profile is decreasing with the mine they are putting on in Saskatchewan. Once that is done, the free cash flow increases immensely. Dividend is up fivefold in the last 2 years. Yield of 3.38%.

Long term hold. Global population growth means there is a global need for potash. A great hold.