PotashCorp (POT.TO) Buy, Sell or Hold

PotashCorp (POT.TO)

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COMMENT

Potash prices are very strong and firm and will likely stay that way for a couple of years. There are very few major producers that can supply potash to the needed markets. He would limit this stock to 3% or 4% of your portfolio. In the longer term, there could be more competition.

HOLD

We continue to be in this amazing climb in fertilizers for the agricultural sector.

BUY ON WEAKNESS

Great chart showing a solid trend and the stock is still well above that trend. It could pull back to the $135-$140 level and he would buy at that level. It across that level and showed weakness he would sell.

COMMENT

He has a model price of $136.54, which is a -32% differential. This is a situation where the stock price is anticipating the model price jumping up. Prefers Agrium (AGU-T) which he thinks is better value.

DON'T BUY

Fertilizers are in a very interesting situation right now. Made huge long-term moves and very large short-term moves. Historically, the stock is very extended. Once a stock is 70% to 100% from its 200 day moving average, it is looking for a significant short-term decline. A lot of the volume has been on the down side in the group since they peaked a couple of weeks ago. Very high risk right now.

PARTIAL BUY

Potash has had rampant speculation over and above the basic investment demand. Changes in diets in emerging markets will mean a long, steadily rising demand for high-protein food. Reasonable entry point, but phase your Buy program over a month or two. Long-term investment.

PARTIAL SELL

Price has been going up parabolicly and got severely overvalued. The first clue is when the story of food shortages has gone from page 16 to page 1 repeatedly. By the time it hits page 1 it's old news. Vastly overpriced. Lighten up.

DON'T BUY

Was very overbought. Won a terrific contract with the Chinese pushing the spot up quite spectacularly. Would not purchase at this time but let it correct back down, probably the $160 area.

DON'T BUY

If the US$ bottomed and held firm, he thinks these stocks would roll over. He thinks the stock has run too hard and he has sold his holdings. On the longer-term basis, it won't be a bad place to be.

BUY

Fertilizer plays are the way he would go to play the Asian agricultural sector. Potash currently has spot prices of $1000 plus per ton. This will not be sustainable but it looks like prices are going up.

PARTIAL SELL

Has a hard time justifying the stock price. Long-term growth rate has been about 14% and he gave them at 25 multiple and still couldn't reach their price. If you own, consider carrying back and rebalancing your portfolio.

PARTIAL SELL

The price of potash is rising on demand from Asia. Stock has gone up 210%. If you own, you should consider taking some money off the table. He would suggest selling a third. There has been such a relentless ride on the stock he would not add or buy at this price. Inevitably there will be a 10% or 15% pullback and that would be the time to add.

DON'T BUY

Fundamentals for this company are spectacular, earnings momentum is going to be great and the whole agricultural sector is going to be a hot one for many years. Multiples are very high on this one. Will be reporting earnings very soon and there could be some selling off on the news. Look for a period when the market is weak or the stock gives up a lot based on news.

COMMENT

If you own, he would recommend following it up with a trailing stop. You could consider taking some of your profits, perhaps one third. Doesn't think this will be straight higher but that there will be corrections.

COMMENT

Trading at 20X earnings. Has a great operation, but people are buying it on the basis that potash prices are going to keep rising. They just put out 1 million tons to China at a fixed price for a year so you are looking at a year before there is any significant price increase.

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PotashCorp (POT.TO)