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The question around this is what has happened fundamentally to the market for potash. At the end of July, there were some massive developments. The potash cartel was effectively broken. Economic demand-side has not changed but pricing power for companies has changed. Thinks this is a Hold short-term. Demand side pull, long-term looks fantastic. For a long-term investor, he looks at this as a buying opportunity.
With a company like this, that is restructuring itself, and to have a yield is going to attract more capital. Question is, is it going to be more sustainable institutional capital. Short-term, we’ll see. Longer-term it is a very interesting company. The fact that it pays a dividend now and has a dividend payout ratio that is appropriate and prudent, between 30%-60%, absolutely.
(A Top Pick Jan 22/13. Up 7.70%.) This is all about the tower business. A highly scalable, attractive economic model. Free cash flow generation. Strong management team. Have a global footprint. Buying the towers and leasing them back. Very little debt. Well-positioned for the next leg of the bull market in the next 18-24 months.
(A Top Pick Jan 22/13. Down 8.67%.) Nitrogen, base fertilizer, as opposed to potash-based names. Nitrogen applications increased in the spring and will continue to increase. We have gone from cooler/wetter weather in North America to now being dried up in the last 5-6 weeks. Whenever you get lower yield in corn forecasts, applications for nitrogen-based fertilizers are going to go up.
(A Top Pick Jan 22/13. Down 16.21%.) This one got ahead of itself because of OSB (oriented strand board). When you look at OSB and the production and residential construction, you have seen this one come back in the last few weeks. This is a long-term hold. He is still buying more shares. Will have some volatility, so Buy on dips.
Well-positioned. Looking at packaging/container board names, the bottom of the box usually has Rock Tenn imprinted on the bottom. When you look at container board price hikes, and increases in container board packaging, this one has pricing power. Price hikes they have implemented in the last 12 months are driving free cash flow. That free cash flow is driving the stock price. Has a long way to go.
Pipelines. Highly differentiated by regions, geography and subsector. Pipeline business has been quite reliable in the US. You have to pick the right region, country, as well as the right pipeline operating company. Canadian pipelines have been a good trade for as long as it has lasted but is now taking a bit of a pause and is settling in its space. He would not be allocating away from energy but you have to be in the right region and the right company. Also, look at balance sheets. (See Top Picks.)
Has had underperformance in the last year plus. This is in a market where most of the forest products have been on a tear. On a company this small and having this kind of performance, he would be very cautious on it.