Dan Schmeidler

Buy, Sell or Hold: What to Do with Potash Corp.?

Anything equities right now is damaged. The market is completely upside down and irrational. This is reflected in how Financials have become market leaders and the Energy sector a laggard. The fundamentals show completely the opposite. This must be one of those summer trading days where the heat must have gotten into people's head. There is simply no explanation to how stocks like Merril "and the rest of the gang" are able to sustain current levels, while POT or FCX are experiencing brutal sell-offs. This can mean nothing more than a set-up for more of the same we had all year: Sell-offs in the Financials and run-ups in anything commodities. I figure late August, early September, might be a good time to see those rotations again. I do not believe though that commodities will make higher highs in the near to long term, unless the Feds come to their senses (probably some months after the election). Yes, we had run-ups in commodities last summer (especially after sell-offs), but we were not as negative on econonmic growth as we are this time around. POT is just not a great play right now. It is unfortunate, because spending a lot of time studying this company is guaranteed to turn anyone into a bull.

Ten Reasons Why I'm Waiting to Buy PotashCorp

Yes, to some, meat is an essential component of the diet. But there are other ways to feed a global population than to rely soley on expensive fertilizer products. There is a supply story attached to it that has allowed Potash to profit massively from price increases. How high can Potash Corp. continue to push up its prices before countries such as China or India or going to find alternative solutions to feeding their people. Does this theme sound familiar? Look at what happened to the supply side of oil when it hit $140. It took weeks to figure out that inventories were starting to "fill" up, because everyone was so obsessed with the essential necessities to run the world on oil, no matter at what price. Well, price mattered in the end. And as oil dropped, no one wanted to get near it for about $20 to the down side, and still, more to go. I am not sure when potash and other fertilizer makers are going to run into this issue, but eventually, those empty warehouses are going to fill up with fertilizers if the ag group keeps raising their prices. Don't count on Q-3 to deliver on their earnings forecast, and don't count on the next quarter to be revised upwards once again.

Ten Reasons Why I'm Waiting to Buy PotashCorp

Looking at the POT chart, I am going to have to agree with this article with respect to a potential downward POT stock move. A lot of the commodity stocks (granted, outside of the AG group), have recently visited their 200-day moving averages. Many experienced sharp and sudden declines from their 50-day averages. The recent sell-off in POT to just below its 50-day moving average, could be a sign of the markets setting itself up for a further downward move. Certainly, a move back up to $220 is a possibility, but then, market expectations would be to break a new high above $240. If a susbstantial move above $220 fails, look out below: $160. And who is not to say that the world's rampant carnivores, might opt for a healthier diet of fruits and vegetables for a while.

PotashCorp: UBS Analyst Cautious Despite Record Quarter

The Ag group is the last of the commodities still hanging on. Oil, Steel, and Nat Gas, especially, have already lost their floor. I am still wondering why one would think that the Ag group deserves to be so expensive. POT is trading at a PE north of 40. Nat Gas is around 20. RIG (driller) is around PE 8. I believe the potential is indeed there for the market to rotate and assign the Ag sector as a whole a lower price tag. Even with the amazing earnings coming from POT in Q-2, a peak in its stock price $240 is a good possibility.

Agriculture: Are There Still Bulls in the Supermarket?

Tough call here, but I think it is a good idea to be taking a breather here from the ag group. Oil has dropped significantly, so has gold. POT, for example, reported phenomenal Q-2 results, but it is starting to hit resistance trying to break the $210-220 level. One might think the stock is cheap right now considering the company expects to earn an annual $9.50 - $10.50 EPS. That would give the company a P/E of about 20 at $200 a share. the question is if the market is willing to bid this stock up to let's say P/E 25 ($260 stock price) based on the company's current full year guidance. Maybe, but I think there is also a possibility that fertilizer products such as Potash might experience similar downward price pressures as many other agricultural commodities have recently.

Gold, Oil, Potash and Food: Top Investments This Decade

Also, the markets are seemingly guessing that a bottom reached in the "loosening" interest rate cycle, will soon imply future rate increases, stronger currencies, and lower inflation expectations. Apparently, that is why markets are bidding Gold prices down. I would disagree with this assumption, because it is about as optimistic as one can possibly be about an outcome to our current environment.

Gold, Oil, Potash and Food: Top Investments This Decade

Yes, Gold is falling. Yes, Ag is correcting. The point of the article (which I strongly agree with) is that investing encompasses the purchase of an asset for a future return. The time frame for an investment in volatile times (similar to today's) should be extended even further. Don't look at Gold prices falling (while interest rates are going back down to historic lows) as a trend. It would be absolutely irrational if it was a trend. The more Gold prices are falling in an environment where interest rates are near or nearing all time lows, the more likely it is that a bottom for Gold will soon be found. As far as Ag is concerned: The same. Lower interest rates will drive inflation higher, especially (as proven by recent market prices) on essential or nondiscretionary items. Discretionary inflation is pretty much nonexistent and even deflationary and should therefore allow the Feds to keep the interest rates low for a longer period of time. (This of course, the FOMC will NOT admit to today: They want to create an environment of lower inflation expectations and will therefore probably even hint at rate increases in the near term). If you are looking short term, stay away from Oil, Ag, Gold. Long-term though, a WHOLE different story (see aforementioned $2000 - $200 parity).