PotashCorp (POT.TO)

POT-T is very much a commodity business and can’t control prices any more. He prefers the equipment side like AFN-T. AFN-T has smaller, less costly items that have to be replaced more often and sales are booming in South America. This is a great buying opportunity for AFN-T where it has just bottomed out.

(Market Call Minute.) This a Hold after their dividend cut, because potash prices are pretty depressed.

They are cutting supply to equal demand. She prefers AGI-T. There is probably no catalyst.

Potash has come down to one of his structural lines and is now having a nice bounce.

Potash is in a bit of a bear market right now. Formerly was trading at $1000 a ton, but is now running $220-$300, which is still profitable. We need more cutbacks in the product to rebalance the market. In the medium to long term, there is a need for potash, but we need to get this oversupply situation straightened out in the next couple of years.

Had been Short this in the past, otherwise has never taken part in it. Fundamentals in that market just don’t look great. They are going to improve, but at this point they are still in the early innings, and it could turn back very quickly. He is cautious on the name.

The agriculture space has been difficult over the last 18 months. Seasonally you would look at these stocks, but he does not see a sustainable bounce in the near term so would avoid the sector.

Has gone through some turmoil of late and cut their dividend. Closed down some operations in Nova Scotia. Potash is an oligopoly and thinks some of the people in the oligopoly are just going to continue to produce a lot and get out of the oligopoly and push down prices. The risk here is if the price of potash goes down. If you are going to buy it, look for a price of $15-$18. Fundamentals for that industry is pretty good.

They cut their dividend after a bad quarter. People did not expect guidance to be so low for 2016. They are dominant in the business. There is a lot of bad news built into the price and after today’s negative announcements, the stock has climbed. It is worth taking a look at.

The Dividend yield of 9.4% is sustainable into the 2^nd half of this year at least. The company says that potash prices would have to go to $200 or less for them to cut the dividend. They shut down their higher cost New Brunswick production.

They tried and failed with a takeover. He struggles to see what turns this thing around.

Hasn’t looked at this for a while. He has zero exposure to material names, including fertilizers. Years ago this is a name that nobody could stop talking about. There has been a slowdown in terms of spending from farmers over the last couple of years. Until that changes, this company and other fertilizer companies are going to struggle. The stock is well below all the moving averages, and the moving averages are falling.

In the past they have indicated that their dividend was quite important. Then there was some posturing that maybe another use of capital is to cut the dividend and buybacks in the stock. Have indicated they can sustain their dividend as long as potash prices remain above $200 a metric ton. There is still a lot of room. Their CapX profile is declining over the next few years. However, we have all learned that when yields go through the 8%-9% threshold, markets start to question the validity of the dividend, and whether it makes sense.

Has looked at this over the last several years, but has never stepped in. He is now looking at it with a $20 entry-level. A low cost producer and a free cash flow generator. Well-managed and it is in Canada. The price of potash is very tied to corn prices which have been weak. They run a great operation.

Had owned this for years, but is out of it now. Likes the fertilizer complex going forward. If we can just get some bids to come in. Not expensive and at some point you are going to see a turn. He would add at that time.