Update Potash of Saskatchewan (POT)
I don’t remember putting “volatility” on my Christmas list but Santa has sure delivered a big box of the ups and downs to shareholders of Potash of Saskatchewan ( POT).
In the last two weeks the stock was hammered on rumors that Potash spot prices in China would stay stuck below $350 a ton well into 2010. And that contracts for long-term supply now being negotiated could be for prices as low as $300 a ton. That took the shares down to $105.01 on December 18 from $116.59 on December.
But what December takes away December can give back as volume starts to fall as we approach the end of the year and volatility climbs. (See my December 18 post on end-of-the-year volatility http://jubakpicks.com/2009/12/18/whats-the-matter-with-fill-in-the-blank-with-your-favorite-stock/)
Today, as of 1:45 P.m. ET, the stock is up 4% on rumors that Belarusian Potash Company expects to sign a deal before year’s end for supply of potash to China in 2010 at prices closer to $350 a ton. This isn’t really new news. Wall Street has been expecting this deal with China and hoping for this price for months, but coming after last week’s rumors it’s enough to move the stock to the upside.
A Goldman Sachs upgrade doesn’t hurt either. The company added Potash to its Conviction Buy list.
I think this is all end-of-the-year noise and doesn’t change the fundamentals for Potash. Those depend on farm incomes and how quickly farmers start to reorder fertilizer. As of December 21, I’m leaving my target price for Potash shares at $125.
Full disclosure: I own shares of Potash of Saskatchewan in my personal portfolio.
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Thanks Jim! I had taken some profits in POT last week at just over $118 a share and put in a limit order to buy them (plus a little extra) back at $105.
When I saw your post about wishing you’d sold at 116 and bought back at 106, I decided I’d reach a little and bought them back at $105.70. Would have been kicking myself if I hadn’t since I would have missed out by $0.01.
So “Thanks!”
Large profits attract large competitors! The market is forward-looking.
Mr Jubak — isn’t the limiting factor on most farms (world wide) the availability of fresh water (and not fertilizer)? I think you mentioned this problem in your book?
The demand for more fertilizer can’t grow if farms don’t have the ability to water additional crops