Will Bauer

Is Fertilizer Starting to Stink?

Hmmm...gee...let's see...Provided potash prices remain high - and there is every reason to believe they will with Uralkali now plumping for a 2009 $1K/mt contract with China and the possibility that up to six per cent of world production (arising from POT's mines currently idled by the strike) is temporarily gone (until the strike ends) - if I wait a year, that puts POT's predicted profit per share at about $21 US (based on analyst estimates for 2009)...so a P/E of 15X trailing earnings would send the share price a year from now to over $300. Not only that, let's now add in a 2009 5% share buyback like 2008's or some purchasing of additional companies using 2008 profits (or both)...hmmm...that makes about $320/share. Sounds good - I'd take that bet...and I have. Better yet, if people actually start valuing POT like some of the ridiculous retail chains or credit card companies out there and it sells for 25 times *forward* earnings, things will go absolutely crazy (in a good way)...but I'm happy with the notion of $300/share based solely on the bet that the 9M or so Mt of world under-supply of potash keeps the 2009 price at ca. $1K/Mt. ...And this doesn't even start to account for their expansion in production capacity, some of which will be available for 2009/2010.
IMHO, POT is about as solid a winner as I've ever seen...with a very plausible growth scenario over the next four years...which is why people call it *investment*, as opposed to month-to-month, week-to-week, or day-to-day speculation.