Barry Isaacs

The Real Reasons Fertilizer Stocks Are In the Dirt

SB-tiger sounds as if he has his finger on the pulse of what is going on with the AG stocks but it turns out his finger is finding a pulse in jello. Conflating commodity prices with nutrient prices sounds reasonable but has no actual correlation; to wit: nutrient prices have not come down but share prices of the nutrient companies have plummeted. This is exactly the opposite of what we were told to expect with the share price decline FOLLOWING a decline in the relevant commodity prices. So we really need to look elsewhere for a coherent explanation. All this 'bubble' talk is so much blah, blah; sounds are trying to come out but nothing is being said. There is no reduction in the demand for key nutrients like potash as customers are all on allocation. Supply increases are years away if at all and then largely a result of expansion by the very companies whose shares were blown away.

I am not saying 'buy,buy,buy' in this sick environment. Just that companies, say, like Mosaic, that now trade at less than 3 times earnings but are sitting on billions of cash and generating billions more with no end in sight given their current growth rate, are companies more likely than not to make their shareholders richer, not poorer, in years to come.

The Real Reasons Fertilizer Stocks Are In the Dirt

Free cash flow. Nothing fancy. Just walking around money. The AG stocks that have gotten their share prices destroyed nevertheless essentially print money and they will continue to. Every one of them could just buy back their public stock relentlessly followed by massive dividend payouts when the growth slows. PCA has already begun to do this with successive 5% repurchases and Agrium has just announced its 5% program. MOS will likely follow. What better use of their money can there be when their stocks are so dirt cheap? I believe these stocks will be back, big time.