Update Potash of Saskatchewan (POT)
Just before Christmas Belarussian Potash finally signed its long-awaited deal to sell potash fertilizer to China for $350 a metric ton (including freight). That put a floor under potash prices and gave investors the certainty they’ve been waiting for. The result was today’s (January 5, 2010) upgrade for Potash of Saskatchewan (POT) and several other North American potash producers to “outperform” by Credit Suisse. That has sent fertilizer shares soaring today. Potash of Saskatchewan shares were up 5.7% for the day as of noon on January 5.
At $350 a metric ton the price was lower than many had hoped—prices hit $520 a ton in 2008—but higher than the $300 a ton some had feared. The deal did indeed lead Potash of Saskatchewan to cut prices on December 28. But the signing will remove a major log-jam holding up other sales. Nobody wants to buy if prices are about to head lower. China normally gets a rock bottom price because it buys so much potash and other fertilizers. India and Brazil, for example, normally pay a premium to China’s price even though they huge customers. The upshot is that after Belarussian Potash/China deal customers can buy with knowledge of where the floor is.
In its upgrade Credit Suisse forecast that global potash sales would climb to 45 million metric tons in 2010. That would be a huge increase from the 25 million to 30 million tons in demand in 2009.
But the jump in demand isn’t likely to bring a big increase in potash prices. At least not immediately.
The potash industry has plans to expand existing mines to add about 20 million tons of potash production capacity by 2020, Credit Suisse calculates. That should keep potash prices below the $520 per ton of 2008 until 2016, according to Credit Suisse.
As of January 5, 2010, I’m raising my target price for Potash of Saskatchewan to $130 a share by March 2010 from the previous target of $125 a share by June 2010.
Full disclosure: I own shares of Potash of Saskatchewan in my personal portfolio.
Jim-
Where does that leave YARIY? Any change to that target? Do you prefer POT to YARIY?
lakesider, not all fertilizer is equal and not all fertilizer companies sell the same fertilzer. The two companies actually sell very different mixes of product with POT closer to a pure play on potash. I think YARIY’s market are closer to a recovery, especially in price, than POT’s but that POT has more long-term earning power. The news on the potash market doesn’t have much impact on YARIY.
Jim, I think mad money’s Jim Cramer is following your site. He definitely told everyone to buy POT shortly after your original buy post. Its great to have famous fans eh?
I wonder how much something like that affects the stock price, probably alot i’m guessing. Glad we’re following you, who seems to have a great ability to find great picks like this first.
marr.bo, I’m pretty sure Jim C and Jim J know each other. I’d guess Cramer isn’t so much a fan as he is a colleague ;o)
I don’t want to make polarizing comments but for my money Jubak is the investor to be taken seriously. Cramer devotes a lot of of his energy to journalism/showmanship, and his web site, and only what is left over to serious stock picking, while Jubak is dedicated to just finding great stocks. And I think their investment results at the end of the day, reflect that.
I accidentally told my broker I was out of pot and then asked my dealer to buy 500 shares of POT……..whoops!
I will say I watch Cramer, but I lend far more weight to Jubak’s picks. Cramer is good for picking trends (the forest), but Jubak is good for picking stocks (the trees).
I completely agree w/EdMcGon. Bith JJ & JC have their areas of expertise. To be fair to JC, he talks about scores of equities *daily* and sports somewhat of a traders mentality (not a bad thing in my books – does your bank care *how* the $ was made?). JJ does a fantastic job of devoting time and diving deep – JC just doesnt have that kind of scope with his show/columns etc. Both ROCK.
Before we get too gushy here, remember that several months ago Jim bad mouthed Dupont (DD) and Applied Materials (AMAT). Since then both have soared, especially DD which has more than doubled. The lesson is: Always do your own homework and don’t follow someone else’s advice blindly!
No one scores 100%. This is a probability game. And market conditions and information available can change and sometimes changes very rapidly. One to two months ago the experts at Zachs awarded POT with their “Bear of the Day” designation. Within a few days of this call it shot up to 123. (I’d like to have some more bears like this in my stock portfolio.) Predicting stock price movement is not an easy job.
Jim doesn’t just make a call. He gives very reasonable explanations as to why he is making the call. In any event, as eyedoc66 says, you need to follow the stocks and see what develops.
Jim:
What do you think about any other Potash companies, such as Potash One, Inc.?
Jim,
I am also curious about Yara International. Should we perhaps take just our profits off the table or liquidate totally? It is at $49.34 as I type this. Thanks for this great pick! I am up nearly 71% from when I purchased.
Jim,
Seem YARIY has taken the rising dollar on the chin in the last month or two. Should we take our profits now or ride it out? I keep hearing the dollar may retreat in the 2nd hslf of 2010. Is your $53 target by 11/2010 still looking good? Thanks for all the advice !!!
Roswell Buckeye