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  • Intrepid Potash Will Weather Storm But Less Risky Choices Exist [View article]
    SBCapital,

    Your POV makes a certain assumptions about the proposed sale of the 22% stake that I don't share. But even if we assume that any such sale will cause those two companies to agree to operate Joint Venture again, it still does not deal with the farm economics based crop prices that will almost certainly be lower a couple of months from now.

    As with any cyclical business, cycle will eventually recover and upswing, I just happen to think it will take more than the exchange of a few shares before it happens. Thanks again. I appreciate your contribution.
    Sep 15, 2013. 08:18 PM | Likes Like |Link to Comment
  • Intrepid Potash Will Weather Storm But Less Risky Choices Exist [View article]
    SBCapital, thanks for reading the article. Yes high volatility is there on the up & downside for IPI, which is one of the reasons I prefer the larger producers (lower downside risk).

    Your point regarding the plant capacity/productivity upgrades are also well taken. However, expanded production capacity / productivity does not have nearly the impact that price & volume do on gross margins.

    After potash prices trough (after crop prices their bottom) and a new cyclical upswing begins those plant upgrades will help margins look better. Thanks again for reading the article.
    Sep 15, 2013. 12:50 AM | 1 Like Like |Link to Comment
  • Intrepid Potash Will Weather Storm But Less Risky Choices Exist [View article]
    takeone1, thanks for reading the article. First, while IPI is small I don't think we can call them insignificant since they are the largest potash producer in the US.

    Takeovers typically occur during peak and/or bubbles in an industry when optimism is at a peak. The fertilizer space is moving towards its cyclical bottom so there would be no excitement from acquirers or company management in my view.

    Understandably, no company wants to sell itself cheap, which is all that could happen in the current environment. While a deal is technically possible, it would be looked at VERY closely by the DOJ given that the potash industry is already somewhat concentrated.
    Hope this helps. Thanks again.
    Sep 13, 2013. 10:47 AM | 1 Like Like |Link to Comment
  • Why Potash Corp. Is Relatively Overvalued And Will Underperform Peers [View article]
    Jacobtr, actually within the context of relative valuation models, most industries/sectors are most closely priced (lowest standard deviation) by price to sales or price to book. The widest variation is price to cash flow or price to earnings although studies have shown that low PE stocks do tend to outperform, ceteris paribus.

    Price multiples are not all that useful outside of relative valuation models in my view. Of course the retail investor is comfortable with PE because it is widely cited as discussed in Wall St. media.

    Thanks for your comment.
    Sep 1, 2013. 09:47 AM | Likes Like |Link to Comment
  • Insider Buying And A Business On The Cusp Of Inflection: Shares Have 58% Upside [View article]
    Hi Ashraf,
    I have a couple of questions:

    1) With DIRECTV seemingly deploying their Genie platform successfully in addition to streamlining their purchasing, who do you expect to pick up the slack given that DIRECTV is the companies largest end customer?

    Comcast, Cox, DISH, Time Warner & Verizon + DIRECTV account for roughly half of firm revenues. If not one of these companies, is there a new customer out there with strong growth prospects?

    2) Why were R&D expenses relative to revenues so much higher in 2012 when compared to prior years? It was a major contributor to lower earnings in 2012.

    Lastly, do you think the company is a prospect for takeover? I ask because the EV metric is generally understood as a theoretical takeover value. Thanks in advance.

    G C
    Aug 22, 2013. 05:38 PM | Likes Like |Link to Comment
  • Why Potash Corp. Is Relatively Overvalued And Will Underperform Peers [View article]
    jvegas, We simply disagree. I've been criticized many times before with much worse language than you have used. It comes with the territory.

    The logic in the article is clear, It just happens to disagree with I'm certain is your long position. That's OK. I appreciate your opinion and I'm certain that you will come to appreciate mine over time as others have. Thanks again for reading the article.
    Aug 21, 2013. 10:08 AM | Likes Like |Link to Comment
  • Why Potash Corp. Is Relatively Overvalued And Will Underperform Peers [View article]
    jviegas, thanks for reading. I've written 9 articles on Potash Corp. and included many different aspects of their business.
    It might be helpful to learn a little about relative valuation models, price multiples and their respective strengths and weaknesses.
    Perhaps I should have spent some time going over the basics. My apologies. There have been many studies done on the various price multiples and relative performance. O'Shaughnessy (1996) comes to mind.

    Actually, POT has outperformed MOS by 0.35 percentage points since publication. Thanks again for reading.
    Aug 20, 2013. 10:31 PM | Likes Like |Link to Comment
  • Why Potash Corp. Is Relatively Overvalued And Will Underperform Peers [View article]
    Albionwood, relative valuation is one of many tools an analyst can use to value a given asset. With regards to your last sentence, that is explained in the article. It is not a question of an analyst placing importance on any metric, That would be unwise. It is a matter of how the "market" is pricing a stock.

    Without re-writing the piece in the comment section. I discuss standard deviation, or variance in the article.

    With regards to earnings, they tell the same story regardless of company, that the cycle is bottoming. They will return to upswing again. It is a cyclical business. As always, thanks for the comments.
    Aug 12, 2013. 06:43 PM | Likes Like |Link to Comment
  • Why Potash Corp. Is Relatively Overvalued And Will Underperform Peers [View article]
    Potash is a global commodity and priced accordingly.
    Aug 10, 2013. 11:25 AM | Likes Like |Link to Comment
  • Why Potash Corp. Is Relatively Overvalued And Will Underperform Peers [View article]
    PSalerno, thanks for reading the article. You might be right about that. However, my opinion is that more downside risk exists in the short term as we move towards harvest season. Patience is the prudent strategy in my opinion.

    As for takeover's, Canada has made it clear that they are going to protect their national interests. This takes both POT and possibly MOS off the table. I add MOS because their potash mining operations are also in Canada and the Govt. will have a say about those resources. As a rule, it is rarely a good idea to base an investment on takeover rumors. While its nice to wake up to news of a company you own being purchased at a premium, these situations can unwind quickly when things don't work out, causing heavy losses.

    Thanks again.
    Aug 9, 2013. 11:03 AM | Likes Like |Link to Comment
  • Why Potash Corp. Is Relatively Overvalued And Will Underperform Peers [View article]
    The fertilizer business is a great business to learn. keep it up.
    Aug 8, 2013. 06:05 PM | Likes Like |Link to Comment
  • Why Potash Corp. Is Relatively Overvalued And Will Underperform Peers [View article]
    Cesc, thanks. I have detailed models and financial data of every company and crop market I cover. In the case of the crop market, the data spans a few decades.

    If I have it right you have asked three questions.

    1) What has COGS increased so much in 10 years?

    2) Wouldn't a higher operating capacity partially offset a price drop?

    3) When new capacity added should lower cost mines be shuttered?

    1. For all the reasons you mention. Note that gross margins have risen and dropped with price over the years.

    2. Higher operating rates do lower margins, but only fractionally, not enough to offset huge per ton price drops.

    3. "lower cost" is kind of a broad term. One would not operate a mine of any type if the rate of return is less than what is required by a firm.

    Lastly, I'd like to mention again that your question and the questions of many others focus on company operations while this article is about how the market prices the stock and industry, reasons for the valuation and what this implies for the future. There is a difference.

    As always thanks.
    Aug 8, 2013. 08:54 AM | 1 Like Like |Link to Comment
  • Why Potash Corp. Is Relatively Overvalued And Will Underperform Peers [View article]
    437919, thanks for reading. Mr. Doyle is ALWAYS enthusiastic and positive, in addition to running the company that's his job. The last graph above illustrates that the stock is down 50% since the last split in Feb 2011.

    Each quarter between then and now Mr. Doyle has been a cheerleader for his company, this is what he is paid to do. If you blindly listened to that you are down 50% as well. Thanks for reading the article.
    Aug 8, 2013. 08:35 AM | Likes Like |Link to Comment
  • Why Potash Corp. Is Relatively Overvalued And Will Underperform Peers [View article]
    sssandhu, thanks for reading the article. I do not mention China Green by name anywhere in my conclusion. They are simply part of the peer group. In fact, I have never published a report china green.

    Opposing POV are always welcome. That's what makes a market. As it has already, time always separate accurate from inaccurate forecasts and conclusions. Thanks again.
    Aug 8, 2013. 08:20 AM | Likes Like |Link to Comment
  • Why Potash Corp. Is Relatively Overvalued And Will Underperform Peers [View article]
    Hi material guy, thanks for reading the article. The basic concept you explain is intuitive.

    I have not written anything about a change in shareholder wealth. My points are clearly described in the article. if not, then I'll try to do better next time. Thank again for reading.
    Aug 8, 2013. 08:12 AM | Likes Like |Link to Comment
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