PotashCorp (POT.TO) Buy, Sell or Hold

PotashCorp (POT.TO)

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COMMENT

The best time to own this stock is from June 23rd through to early in October. This trade has worked 18 times out of 20 and the average gain per period is 23%. Technically it is starting to show signs of going into a period of seasonal strength.

PARTIAL BUY

Commodity prices have sold off a little bit. He would rather be in this group in the food oriented commodities than some of the base metals right now because of the global uncertainty economy wise. A little bit more defensive. Prefers Agrium (AGU-T). You could nibble at this a little bit down at these levels.

COMMENT

Sell the stock or Buy an option? If you are not getting enough premium for selling an option, why not Buy them? Sell the stock and take a little bit of the money and put it in a Call Option and effectively replace the stock with a Call Option, put the rest of the money in a GIC or something until the option expires. You have now created a convertible debenture.

BUY

Thinks it is a good buy. Likes potash because the world has to eat. He is positioning for a stagnant market and everyone has to heat.

PAST TOP PICK

(A Top Pick July 13/11. Down 30.47%.) Owns a large chunk of strategic resource. We always need this for agriculture and development. Agriculture commodity price has pulled back because of market uncertainty. The problems are short-term issues and you can look for things to get better in a few years. Would accumulate at this price.

BUY

Large project and generating cash flow and valuation is cheap at the moment. Good entry point.

COMMENT

Fundamentals of fertilizer/agriculture company such as this make sense for a longer term. Population in emerging markets is growing, getting wealthier, so food habits are changing so therefore we need more and more fertilizer. Unfortunately, stock prices in this space have been falling and this one is still below the 250 day moving average. He would wait before buying.

DON'T BUY

Sells at a high market to book ratio. When it makes money it makes a ton, but when prices are weak, profitability is not great. Sells at a rich multiple. It has one product that carries most of the business. Compared with other alternatives in the industry, they are safer – less swings in price.

BUY ON WEAKNESS

Stock is coming down slowly. $37.25 would be a very important support level for him and that's where he would Buy it. His model price is $51.34, a 29% upside.

WATCH

Seasonally, agriculture stocks can be okay around this time and on. 1st, he would like to see a bounce off the $40 level, which would prove that it is finding support into its traditional cycle.

BUY

Both this and Agrium (AGU-T) are buys down at this level. Commodities in general have softened over the last 4-5 months but people are going to eat and the US economy is getting stronger. It was a decent planting season this year.

WAIT

Normally seasonality good from June/July and makes big moves. Ends end of Oct or end of year. We have a good support level here and it will be a good sign if the support level holds. In terms of fundamentals, watch the grain prices and if soy, wheat, corn moves higher then farmers will buy more fertilizer by end of year.

DON'T BUY

His problem with this is that it is an expensive stock. Owning this, you are really speculating on the potash price going up, which is what will drive the stock price. Potash is a little oversupplied right now. To make money on this, you just need the stock price to be cheaper.

BUY

Has been struggling but he would Buy at this price. On his Buy list. He tries to buy around $40 in sells at around $50.

PAST TOP PICK

(A Top Pick Oct 27/11. Down 15.33%.) He actually didn't get into this one because it started to fall apart. Farmers did really well last year and are doing well again this year. He is now expecting this to be a really good trade from mid to late June.

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PotashCorp (POT.TO)