Sunday, October 25, 2009

Selling Potash

As an outspoken advocate for the Potash Corp of Saskatchewan, it pains me to announce that I sold POT as part of my portfolio in the FP Stockmarket Challenge. I did this because prizes are awarded in a few months, and POT is not a short term play. POT is a long term buy. I read a fantastic story in today's Globe and Mail that described it perfectly. I recommended that my father buy Potash when it had fallen from $250 to $80 because at that price it was terrific value. If you don't already know, Potash is a crop fertilizer, and on a "per crop yield" basis, it is the best in the business and a select few producers produce it.

As good as it is, demand for the commodity grew too fast and the price inflated too fast, to the point where farmers started boycotting it in favour of less productive alternatives. That's why when it hit $80, I said buy, buy, buy. Well on Friday we found out that the boycott led to a 95% decline in profit at Agrium, and an 80% decline at POT in the past year. With the growing season over, this situation will not improve much between now and the end of the FP Stockmarket Challenge.

If you are investing with real money at home, I say that Potash is a very strong 5-10 year investment. There is going to come a time in the next decade when there will be a very significant upward pressure on increased crop yields. To fuel that need, Potash is the best in the business. You may want to allow Friday's bad news to further deflate the price before you buy. I'm not sure where the bottom will be, but a sweet peak will happen in the next 5-10 years.

To replace my holdings in POT, I selected Transalta Corp because they are in sync with my "all of the above" energy policy.

1 comment:

  1. Iceman,

    How do you go about valuing your stocks and when to buy?