The Mosaic Co. Added to Goldman's Conviction Buy List

I’d like to congratulate Goldman Sachs for its deft and timely upgrade of Mosaic (MOS) to its “Conviction Buy List”  on Monday. With Bubble 3.0 in full swing, and Mosaic up a mere 1,000% in two years, such insights of unknown companies in unknown industries are highly appreciated by a market where manic behavior is evident on only some trading days.

Mosiac trades at a mere 47x trailing earnings, 11x book value, 8x sales and 34x cash flow.  That’s a bargain compared to PotashCorp of Saskatchewan (POT), which is trading at 52x trailing earnings, 11x book, 12x sales and 32x cash flow.  Heck, Mosaic and Potash are trading at only half what Cisco (CSCO) traded during Bubble 1.0!

Some doom-and-gloom types might point out to you that over the past couple hundred years, such manic behavior and silly valuations in commodities and commodity stocks have always lead to tremendous collapses. Don’t listen to them, because it’s different this time.

Disclosure: I own PotashCorp of Saskatchewan and am a seller into the nuttiness.

Comments

[jamookey:]

I have learned to take quite a few grains of salt with any comments from ALPHA.In house short sellers use this as a forum to spread their rumors and conjecture to move a stock in the direction they desire.Take AMSC for example.At 32$ per share they were noting how the CEO had sold shares and that they really have no real products in the wind technology space and that you would be better off with GE.Todays price is in the 43$ range.Don't take to heart what you read at SEEKING ALPHA,they have their own agenda.

2008 Jun 10 09:54 AM

[windinmyface2:]

I have noticed that offten after a good review on Seeking Alpha, it seems like a death blow to a stock that has been doing well. Now I moan everytime I read a good review by you.

2008 Jun 10 10:32 AM

[Jake2:]

Take Toro for what he, it, is: a lot ob bull.

2008 Jun 10 12:19 PM

[DaveW:]

Thanks for the light moment, I appreciate the sarcasm in this nutty market...

2008 Jun 10 01:30 PM

[groty:]

Looking at trailing earnings and cash flow makes no sense. These are high fixed costs businesses. That means they have high operating leverage, so changes in product prices (either up or down) have a magnifying effect on earnings. Potash prices have been skyrocketing, going up every month this year, so 2008 earnings aren't comparable to 2007.

POT is trading at 13x the current consensus earnings estimates for 2009. But potash pricing keeps going up, and will continue to do so, so those '09 estimates are too low. I know potash prices are going to continue to go up because potash pricing has tripled within two years and POT still has to "allocate" product to customers. In other words, there's not enough of the stuff even at these elevated prices to meet demand. It takes 5-7 years to bring a new potash mine online, so there's going to be limited new supply for quite some time. But make no mistake, these stocks will crater hard when investors start to worry about new capacity coming online. But that isn't a threat for quite some time.

It's no bubble. Fundamentals are driving phenomenal earnings growth. As earnings estimates keep getting revised upward, the stock price will follow.

Goldman has it right.

2008 Jun 11 05:00 PM

[oilshort:]

the funny things about bubble is when it is in full swing
it does not llok like one.all bubbles have some strong story
backing it.There is great possibility that consumer countries will form
alliance when will resist further increase of price.In fact India has already raised this issue in UN.

2008 Jun 14 05:32 PM