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Saturday, April 16th, 2011
pot of gold

I noticed that someone was doing searches on this site related to fertilizer stocks, including Potash (POT).  So, here you go.

This is the same chart format that was used for CHKP the other day — and the two stocks are interesting to compare.  Potash also experienced an enormous rise and fall, although it has bounced back more strongly than CHKP did, riding the wave of interest in all things agricultural among investors and a snap-back in fertilizer pricing.

Is this a cyclical story or a secular one?  I’ve been around long enough to have seen a lot of cyclical businesses get spun into growth stories, so I’m always a bit skeptical.  It wasn’t that long ago that the company was earning pennies a share per year (on this basis; all of the charts are adjusted for the three splits since 2004) and, so far in this cycle, the peak is just short of $4.  Mean estimates are around $3.25 this year and $3.70 next.  What to pay for this business?

The outcome will be influenced, of course, by the great commodity trade.  For those of you more apt to price in gold than in paper these days:  From the start of this chart, POT has done three times better than gold, but is only one-third of where it was versus gold at the peak in 2008.  (Chart:  Bloomberg terminal.)