PotashCorp (POT.TO)

Doesn’t like this name. The dividend is decent today, but there is a significant chance of the dividend getting cut. When you look at their CapX and how much they are paying in their dividend, it is essentially what their entire free cash flow is, which doesn’t leave much left for a buffer.

Sell a $1 January Covered Call? This would generate some income. The dividend could get cut, so this would be a good idea. In general, he thinks the stock is probably a Hold. The potash market is still generally oversupplied, and there is some risk to the dividend being cut, because free cash flow can be squeezed. Dividend yield of 5.9% which is looking a little rich.

(Market Call Minute) They think the commodity cycle is over for a number of years. Move to consumer goods.

This has come down a lot. That doesn’t mean a stock is necessarily attractive. This is down for a reason and it has a big yield. There is a chance that they cut the dividend again, and the stock will go to $17-$18. He would prefer Agrium (AGU-T) because you get the retail side. Potash fundamentals are weakish for another crop year.

Potash prices are extremely low. One possible catalyst is that India signed a contract, so the next big contract should be China. Cut its dividend in the 1^st quarter by 34%. It is still yielding about 6%. We have to continue seeing potash prices improving going forward. Doesn’t feel potash prices can go much lower, but it is a question of how long they continue to stay at this level. There is no immediate catalyst. If you own, she would continue to hold for now. She prefers Agrium (AGU-T).

Not a favourite of his for some years. Dividend looks a little suspect at this level of earnings. Nitrogen prices are down. Earnings at 16 don’t look that great. If you are going to get into the fertilizer business, he would definitely look at Agrium (AGU-T), which has a broader range of products and the marketing side. Potash has these cartels that come apart. Very hard to analyse.

A huge supply of new potash came on the market at exactly the time that the Chinese, Indians and Brazilians decided that they had all the potash that they needed. What made it worse was that producers fell out of bed with each other and wanted to reduce the price. Oversupply, falling demand, no market discipline. Bad news for potash companies. The good thing is that they have 200 years of resources in the ground. If you’ve got staying power, this is probably not a bad buy. He would prefer Agrium (AGU-T) because of their vertical integration and their broader scope of products.

Doesn’t think the dividend is safe at all. Expects their earnings will continue to go lower. Hasn’t liked this company for a long time. The potash market continues to struggle with a potential excess capacity, competitive threats and currency problems.

If you look at world demographics then this business has to be huge at some point. But it certainly has not been the case in the short term. It does not have much strength from a technical perspective.

The name you want to own if you want to be in potash, but this is really the wrong time to be here. With continued slowdown in Brazil and China, agricultural demand is weak. Also, there are still stockpiles of potash in China. Doesn’t believe the 6% dividend is safe, and expects it could easily get cut in half. Agrium (AGU-T) would be a better pick.

Sold his holdings early last year because he was worried about potash pricing. The ones calling the shots are China and India. The company has already cut their dividend, but if that pricing downward trajectory continues on contract pricing, there is a question if the dividend cut was enough. If he owned, he would probably try to find an area of strength where he could trim back, or use covered call writing.

Chart shows this is developing a bottom, but it hasn’t done anything bullish yet. The trend over the last year has been lower lows and lower highs, and that trend is still very much in place. To confirm the bottoming, you want to see this break out over the March-April high of around $25. Consider buying a half a position now. Value wise it is attractive.

(Market Call Minute.) Needs to see some positive momentum before he gets more constructive on the name.

In the agricultural business, you really need potash as you need higher and higher yields. This is a great asset that no one can duplicate globally. Cut their dividend, and may have to cut it again. If they did, he would be a buyer again. Dividend yield of 6.03%.

(Market Call Minute.)