PotashCorp (POT.TO)

This had a spike top in 2008 followed by the financial crisis. That was followed by a rally, but it didn’t make a new high. That was the kiss of death for this. It was followed by a long bear. We are starting to get some volume here, so you are probably okay and you could pick away at this.

5-10 year hold? Has a small position, but hasn’t bought more because the dividend is somewhat suspect. To him, it is probably not a 5-10 year hold, it is a cyclical.

Potash prices hit $1000 in 2008, and it has been downhill ever since. There is a lot of competitive supply coming out from the Soviet Union, and the price is down to a $200-$250 range. Thinks it will take a couple of more years. Meanwhile they have a pretty attractive dividend yield of 5.6%, and you probably want to hold onto it.

(Market Call Minute.) Prefers Agrium (AGU-T) because of the diversity of the product mix and they have the retail side. Feels Potash is under pressure.

This would be an interesting entry point, based on a hunch more than anything else. Not something that needs to be owned this second, but looks like something that has found a level that you could be safely entering it.

(Market Call Minute.) He is looking at a small position for his agricultural fund. The issue is structural surpluses for the next year at least.

(Market Call Minute.) If you are a long-term person, like 3 years, he would Buy, but it is oversupplied for the next couple of years.

They just cut the dividend by about a third and he thinks it is sustainable now. His people keep saying he missed it and then it comes back. He has shied away. It is a great company but he can’t do it at the present time.

The potash market is over supplied right now, especially following the breakup of the cartel in Russia, so pricing is really weak. This is impacting the company, because they are at the higher end of the cost and their margins are compressing. Although the dividend looks attractive, he thinks it is not sustainable at this level.

This has come back quite a bit because potash prices have been very weak. If you have a very long-term view, you could probably Hold this. We could arguably be near the lows. There has been weaker demand, and potash is priced in US$, which makes these products more expensive, especially for emerging countries. Yielding about 6% and there is a question whether they can sustain the dividend.

Concerned about their ability to sustain their dividend. When they cut it earlier in the year, that was the time to do a proper cleanup and cut more than what they did. It is not going to be well received if they have to cut it again. Looking at their CapX spend and the rate at which they are paying out cash flows on the dividend, it is not a very compelling ratio. Doesn’t believe there is going to be a significant improvement in the space overall. A strong US$ is going to continue putting pressure on the company. Also, China is sitting on stockpiles of potash.

He believes in the feed-the-world trade. It is very cyclical, but most of the bad news is in the sector. We are at the ‘08/’09 levels. You need at least a half position in it.

Suffers from the global glut in commodities. People have done silly things with cheap money. We have too much ‘stuff’ lying around. The factory activity index in China has fallen for 47 consecutive months.

Agriculture does well in the second half of the year in the northern hemisphere. Late June is an opportunity and October/November is the sweet spot. We saw a long downturn and now it is going sideways. He would wait for it to settle down for a month. June 23^th is the start of seasonal strength. Take at look at it then.

It is a difficult environment for the pricing in potash as there is oversupply in India and China. They’ve cut the dividend and it is now down to 6.25%. Potash prices may be volatile here and they may have to cut their dividend again. If so, then he would buy more. At these levels, you are not paying a lot for it. Global economy will continue to grow. A great way of increasing agriculture globally.