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Mike Ashton, CFA  

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  • Just One Stock: The Fertilizer Producer Nurturing the Ag Commodities Boom [View article]
    Yes, we've adjusted the position a few times this year. If it goes to $200 we'll take a look at where a few variables stand at that point: corn supply/demand estimates for '12/'13, corn futures, fertilizer prices, and nat gas costs to determine next steps. Upside case could look like 10x FY12 EPS of $23 to $230 if '12/'13 looks like supply/demand for corn approximates '11. If we believe corn supply will expand to meet demand and replenish inventories in '12/'13 (or demand destruction occurs due to high corn prices), we'll be much more likely to trim the stock back or sell it outright near that $200 mark.
    Nov 8, 2011. 05:18 PM | Likes Like |Link to Comment
  • Just One Stock: The Fertilizer Producer Nurturing the Ag Commodities Boom [View article]
    CF still has the wind at its back given the likelihood of higher corn acreage next year (CF management expects >93 mln acres in 2012), more capex for debottlenecking to increase production capacity (adding 100,000 tons of ammonia production capacity), continued low nat gas costs (currently <$3.80/MMBtu), and low global corn inventories (CF management noted on its conference call that the global coarse grain stocks-to-use ratio is expected to be the lowest in >30 years).

    The above factors, combined with a very reasonable valuation (the stock trades at 7.38x NTM EPS as reported by Bloomberg) and the potential for continued large share repurchases (CF repurchased 5.6 mln shares (>7% of outstanding shares) for $801 mln in 3Q11) , make the risk/reward attractive for a move toward $200.
    Nov 3, 2011. 01:53 PM | 1 Like Like |Link to Comment
  • Just One Stock: The Fertilizer Producer Nurturing the Ag Commodities Boom [View article]
    As far as the link between Mississippi Chemical and Terra/CF, Terra acquired the nitrogen and ammonia assets of Mississippi Chemical during Mississippi Chemical's bankruptcy in 2004.

    "To facilitate Debtor's reorganization and bolster its own market share, Terra agreed to buy substantially all of Mississippi Chemical's nitrogen and ammonia businesses using its subsidiary organizations....At the time it closed [in December 2004], the Terra Transaction was worth $268 million."

    Link to summary of Mississippi Chemical bankruptcy case: www.law.utk.edu/images...
    Jun 1, 2011. 12:35 AM | 2 Likes Like |Link to Comment
  • Just One Stock: The Fertilizer Producer Nurturing the Ag Commodities Boom [View article]
    According to CF Industries' 2010 10-K, the company acquired phosphate acreage in 1975, 1997, 1999, 2008 and 2009; the Terra acquisition closed in April 2010, which implies that Terra did not bring phosphate assets to the transaction. Further, Terra's annual reports preceding the company's acquisition by CF did not reference phosphate assets. Finally, in specific reference to the Terra acquisition, CF's 2010 10-K does not list any phosphate assets among those acquired in the deal (all listed assets were related to nitrogen-based production).

    Links to relevant SEC filings:
    1. CF Industries 2010 10-K: www.sec.gov/Archives/e...
    May 31, 2011. 07:38 PM | 2 Likes Like |Link to Comment
  • Just One Stock: The Fertilizer Producer Nurturing the Ag Commodities Boom [View article]
    Mississippi Chemical acquired the Hardee County phosphate assets (12,000 acres/62 million recoverable tons) in 1980 and subsequently optioned the assets to Freeport-McMoRan Resource Partners LP in 1990. Freeport assigned the option to IMC-Agrico in 1993, and IMC exercised the option in 1998, for $57 million. In October 2004, IMC combined with Cargill's Crop Nutrition business to form Mosaic.

    "The Mosaic Company is one of the world’s leading producers of phosphate and potash crop nutrients and animal feed ingredients. It is a Delaware corporation that was incorporated on January 23, 2004 in order to serve as the parent company of the business that was formed through the business combination (Combination) of IMC Global Inc. and the fertilizer businesses of Cargill, Incorporated on October 22, 2004." (Source: Mosaic 2005 10-K)

    Links to relevant SEC filings:
    1. Mississippi Chemical 1995 10-K: www.sec.gov/Archives/e...
    2. IMC Global 1997 10-K: www.sec.gov/Archives/e...
    3. IMC Global 2003 10-K: www.sec.gov/Archives/e...
    4. Mosaic 2005 10-K: www.sec.gov/Archives/e...
    May 31, 2011. 07:07 PM | 2 Likes Like |Link to Comment
  • Just One Stock: The Fertilizer Producer Nurturing the Ag Commodities Boom [View article]
    I attribute the decline to: (1) the materials sector, which was down -1.02% today, significantly worse than any other sector and overall S&P 500 of +0.19%; (2) within the materials sector, fertilizer stocks POT, AGU, MOS, IPI, CF were down -4.66% on average; and (3) CF's EPS report last night.

    Initial reaction to the CF report was down slightly, probably due to hopes for a more significant EPS beat for 4Q10. However, management commentary and outlook on the conference call were very positive, so the company-specific variables remain solid, which should be reflected by upward revisions to sell-side EPS estimates.

    Some other materials sub-sectors also got hit today (e.g. coal, steel) along with fertilizers, so a fair amount of the selling pressure in CF today originated at the sector/sub-sector level. Definitely key to pay attention to that sector/sub-sector level influence if the risk-off mentality sets in again.
    Feb 18, 2011. 06:45 PM | 3 Likes Like |Link to Comment
  • Just One Stock: The Fertilizer Producer Nurturing the Ag Commodities Boom [View article]
    To be clear: I am not -- nor do I claim to be -- an expert in the fertilizer market. We cover stocks across all sectors/industries and select stocks via a bottom up process. We will look at related stocks only to the extent necessary to understand the investment case of the primary stock we are researching. Given our process and time horizon, and the stocks within the industry we are interested in, extensive knowledge of MOS's long-term potash reserves is unnecessary.
    Feb 10, 2011. 08:35 PM | 3 Likes Like |Link to Comment
  • Just One Stock: The Fertilizer Producer Nurturing the Ag Commodities Boom [View article]
    Given MOS's production mix, I'd expect it to trade a bit below POT's multiple. (You can weight the nitrogen, phosphate and potash production for each company to back into a multiple, but the market seems willing to pay an EV/EBITDA multiple somewhere around 10x to 12x on potash production right now; and IPI actually appears to trade a bit above 12x.) I'm less familiar with MOS's potash reserve situation, but I'd look at the quantity, quality and accessibility of MOS's potash reserves vs. POT's potash reserves, and if MOS is in a materially better position than POT, then you could argue for a higher multiple on MOS's potash business.
    Feb 10, 2011. 01:04 AM | 1 Like Like |Link to Comment
  • Just One Stock: The Fertilizer Producer Nurturing the Ag Commodities Boom [View article]
    Follow this link and then click through to Table 2: www.ers.usda.gov/Data/.../. You can see that corn is the most nitrogen-intensive crop, followed by wheat. Cotton is a distant third. Given the much lower nitrogen intensity and fewer planted acres of cotton relative to corn, cotton is less vital to the investment case for CF, but each incremental source of demand helps.
    Feb 8, 2011. 10:29 PM | 6 Likes Like |Link to Comment
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