Hot IPOs: Intrepid Potash and American Water Works

Last year was a big year for IPO's, but it's been a slow start this year with the market languishing. Outside of the Visa (V) IPO, there has been little for traders to get excited about. That is until yesterday when the largest producer of potash, Intrepid Potash (IPI) began trading and soaring more than 50%.

According to MSN, the mining company produces two potassium-containing minerals, potash and langbeinite, that are essential nutrients in plant and crop fertilizer. Intrepid culls these minerals from five mines in New Mexico and Utah, where it also operates production facilities. Potash accounts for 90% of its sales. The company sells primarily within the US to the agricultural, industrial, and feed markets; PotashCorp sells Intrepid's potash internationally. It supplies nearly 10% of US potash consumption annually and is the country's largest producer of the stuff. (The US imports the great majority of the potash it uses.)

As far as the fundamentals, they look solid but nothing extraordinary. My take on this is that this IPO comes at a time when the agriculture stocks appear to be near a major top with perhaps one more last climax run left in them. Does this IPO signal the top? Just maybe. Like all IPO's I'll let it trade for at least two weeks and only enter on a breakout from a bullish pattern.

Yesterday, the largest potash producer in the US began trading. Todat, one of the largest US water utility holding company begins trading - American Water Works (AWK), a subsidiary of German utility giant RWE.

According to MSN, it's one of the largest water utility holding companies in the US. Through its regulated utilities and its contract services division, American Water Works serves more 16.2 million consumers in 32 US states, Canada, and Puerto Rico. The company also provides wastewater treatment in some of its service areas. Nonregulated subsidiary American Water Works Service provides contract management services for water and wastewater systems.

This company has one thing going for it -- okay, two things. It's big and it's a water play. I've been big on the water play for a couple years now and still think you'll see meteoric rises in water stocks at some point, but this utility lacks greats fundamentals.

Comments

[friedt]

When AWK was taken out by RWE a few years back, it was at $44. It took a while for the regulators to accept the deal, and AWK languished at a remarkably low $39 for almost a year, while paying dividends. The arbitrage was incredible! It is now back on market at 20-22, with the need for water and wastewater greater than before. I would suggest that water stocks (not necessarily utilities) will command higher multiples than before, esp. if they develop their water purification and wastewater components. Kelda was taken out in England at a premium. CCC has doubled thanks to China's need for its carbon filters. Aqua and AWK will go higher as people demand water from companies that can provide it better and cleaner than others. These two are ending the monopoly of municipal (and hence regulated) water utilities, opening the possibility of higher prices for the stocks and the related industries. See the Colfax IPO upcoming.