PotashCorp (POT.TO) Buy, Sell or Hold

PotashCorp (POT.TO)

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BUY ON WEAKNESS

Would wait for another 10%-15% down before buying. This year, agricultural stocks in general have been the hot sectors. In the current market environment, investors are taking profits. A fair amount of fear in the market, which will continue to rise, possibly over the next few weeks.

BUY

He looks at if a company’s profit growth is more than keeping up with its performance. This and Agrium (AGU-T) both look fantastic. The moment you start to see erosion in profit growth, there will be trouble with these names.

COMMENT

Selling at multiples that he would find hard to justify. If demand fell off, it's a long way down. If you own, consider taking profits.

BUY

Have significant resources. Expect they will make huge amounts of money if potash prices continue strong. Floods in the US have washed away existing potash so they will have to add more.

BUY

Seems expensive because the share price keeps going higher but commodity price keeps going up and the price deck that analysts use to build estimates are way below were pricing is.

BUY ON WEAKNESS

Multiple wise it’s a little peaky. Probably goes to $250 or $260 but you are getting to a point where you need a pullback to take some of the risk out of buying. Look to $200 for a Buy.

DON'T BUY

Market price is way ahead of the fundamentals but the fundamentals keep on improving in this one. In Jan/08 the model price would have been around $80. Today it is $145.78. Earnings have exploded but the stock price has exploded with it.

PARTIAL SELL

Fertilizers are going absolutely gangbusters. If you are a holder, he would tend to be kind of dribbling out. Prices are getting very extreme, to the point where farmers will have to cut back drastically.

TOP PICK

Using a 20X earnings multiple his target price is $250. Still lots of room for potential earnings ahead.

HOLD

Perfectly valid to own fertilizer manufacturers. He leans towards Agrium (AGU-T) as he likes their strategy of getting into the distribution chain. He sees no signs that the fertilizer boom is going to change in the near term.

HOLD

Rich Multiple, driven by contracts, big demand out of China, not a big buyer at this stage.

BUY ON WEAKNESS

Likes the agricultural sector for 2, 3 to 5 years. Would buy if it dipped into the $180's. Volatile so in a day you can get a $5 to $6 swing. You don't need to chase this.

WAIT

(Market Call Minute.) Trading at 25X earnings and feels it is going lower.

TOP PICK

Sold off a bit because of US short-term planting problems where they switched from corn to other grains. Earthquake in China reduced capacity for them to create their own fertilizers. Fundamental long-term story is very much intact. Would write a $210 call option on it.

BUY

Very bullish the whole agricultural complex because of rising demand from India, China and other parts of the world. Actual supply of grains stored all over the world is at the lowest it’s ever been. Has had a nice correction.

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PotashCorp (POT.TO)