PotashCorp (POT.TO)

Everyone went around opening potash mines and then demand fell. It has fallen way down the list. Once someone has built a mine and the supply from it, it does not go away. So he feels there is a hard top on the resource price for 5 to 10 years.

He sold AGU-T last year and holds nothing in the group. The payout ratio is high. If he went back to the group he would go to AGU-T. The market tells you there is a dividend cut coming.

He likes it in here. There is a good chance they will cut the dividend, though, so be prepared to lose some capital. But that aside, the growth story is fine. It is 30% below where BHP bid for the company previously. It is one of the few resources he is interested in.

Has almost a 9% dividend yield and trading at about 11X earnings. They are the cheapest producer and control about 20% of the potash market globally. Also there are massive barriers to entrance to their business. Dynamics longer-term are pretty good. There are a couple of issues that may hurt the stock short term and give you a good buying opportunity. The Belarus potash company is going to massively increase their production capacity and drop prices. Also BHP has a mine that they were going to open up, but he doesn’t think they are going to be able to do that. Try to get it between $20 and $23.

The days of oligopolies are numbered. The potash cartel was broken up when the Russians went rogue. In the last year, the oil cartel decided to go rogue. You now have a situation where fundamentally there is a lot of capacity, but what price do you get. They can drive prices down to maintain market share, which explains the 8.4% dividend yield. Cash flow generation at current potash prices is still very, very good and they can pay that dividend. However, how much market share can they keep, particularly if others try to take their share. He holds this and is looking at buying more, but is looking for a little bit more stability and a little more certainty as to what the global behaviour is amongst the other major players.

(A Top Pick Jan 8/15. Down 40.02%.) Sold his holdings about a month ago. The long-term downtrend is continuing to abate. Saw some base building in October-November.

He is looking at it. It was expected their free cash flow would increase, but it declined with potash prices. He thinks the dividend is safe. It is an oligopoly, so they should be able to control the price, but the US$ and demand have prevented that.

Typically agricultural oriented stocks tend to be okay from now until March. Chart shows some negativity and it has broken a 2013 low, which is not too good. Everything is being hit right now with the December selloff, so you might not want to sell at this particular moment, but if the market rallies over the next 3 weeks or so, use that as an opportunity to get out of it.

If there are any commodities he feels comfortable with it would be agricultural commodities. Potash prices might go a bit lower, but the stock is probably coming closer to buy territory. He also feels the dividend needs to be cut a little. But it will stay somewhat in place.

You are investing in a resource and depending on the price of that resource. The price of potash has been going down. In early 2000 they started constraining supply and it made a ton of money for the producers. The oligopoly is not functioning any more. He thinks there are better places to be right now.

The chart says it all. It is following the same path as all commodity producers, and not something he would want to own right now.

Potash seasonality had not worked this year the way it normal does. Mid Oct until January it is normally strong, but it is not doing that this year. It is trying to form a base here as are many fertilizer stocks. Seasonality is not clicking in this year. The trend is down and it is underperform the market.

The potash market is well supplied right now. They tried to buy a chemical manufacturer in the summer. They wanted to impose discipline on the market, but others did not want to cooperate. Potash prices are probably close to the bottom, but he wants to avoid it for a few months until crop prices bottom.

It has a good dividend and you get paid to wait. He sold 6 months ago. He is looking for more signs of sustainable growth. He prefers AGU-T

Starting to show signs of bottoming after being hit pretty badly for a long period of time. The period of seasonal strength is currently now, right through until the 1^st week in January. Unfortunately it is underperforming the market and also the TSE composite right now. Seems to be forming a base, but you want to have more evidence that the base has actually been completed. He wouldn’t Sell at these levels, but wouldn’t be a Buyer either.