PotashCorp (POT.TO) Buy, Sell or Hold

PotashCorp (POT.TO)

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DON'T BUY

Incredibly cyclical. Agriculture has a lot of volatility to it. There is also a cartel dynamic which he morally doesn’t like. Also there are new mines coming on stream for fertilizers. Too expensive for him.

COMMENT

With a population increase expected, this is a good holding for the long term. Looking at this. More expensive than Agrium (AGU-T) but he likes both. (See Top Picks.)

BUY ON WEAKNESS

Pretty optimistic on long-term pricing of potash because cyclical stocks were underweight because of concerns on global commodity prices. Wouldn't buy currently but would hold for the longer-term. Would like to see it under $40. 1.3% dividend.

BUY

If you are long term, this is the go to name in the potash space. Recently coming off some mine shutdowns but they are back on now. Be cautious of their first quarter earnings report (26th). You want to re-establish your position.

DON'T BUY

Dependent on potash pricing, which is dependent on the agriculture economy. Feels it has been weakening a little bit lately and investors are probably preparing for a bit of a downturn.

BUY ON WEAKNESS

Upside with the fertilizer stocks is that demand for food will continue to rise over time. Downside is that speculators have walked away from the commodity game and are now into technology stocks. He expects these stocks will go sideways until there is some clear indication that we are going to get economic growth greater than 2% from the global economy.

TOP PICK

Most of the agriculture names have been terrible with the exception of the nitrogen names. Farmers’ seeds (?) in the US are the highest they have ever been and will continue to march higher. All the key crops are moving higher. You virtually get nitrogen for free.

DON'T BUY

Potash prices have been coming down because of foreign buyers reducing demand. Forget seasonality. There is momentum in the fertilizer industry in Canada. Not POT.

DON'T BUY

Not tempted to enter into that market at the moment. Overall from a valuation perspective it looks an bit pricey. Doesn’t see any upward pressure on potash prices. He has been taking a close look at AGU-T.

DON'T BUY

He has always had a problem with valuation – too much premium; and Its cartel is starting to break apart. There are new mines being produced so there will always be stress points on POT. It is still cyclical. He would avoid it.

BUY

He would be included to average in. Recent weakness is because of difficulty in timing contracts with China, but now contracts are signed. China’s imports of Corn will be skyrocketing and this will be good for potash.

WEAK BUY

As a short-term trade it has distinct possibilities. Positive on fertilizers. It does not have enough potential to go into his growth section. But it has a great environment to operate in.

DON'T BUY

Trend is a little bit bearish, but he would not buy into it. He believes in phases in the market. He does not see a discontinuation in the downtrend. So avoid it for the time being.

BUY

Not a bad entry point. Hasn't done as well as Agrium (AGU-T) over the last few months but still trades at a little higher multiple. He likes the agriculture sector but prefers playing it through Agrium.

DON'T BUY

Chart shows a downward trend. Trading below its 50 and 200 day the averages. Strength relative to the market is negative. Momentum indicators are downward. Seasonally in strength starts at around the beginning of July through to the end of the year.

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PotashCorp (POT.TO)