I think best to do if you already own POT or MOS (like I own POT) is to wait to see what happens. It seems this is used as a threat to force the involved parties in East Europe back to the table and compromise. If you sell right now, you will take immediate loss. In the medium/longer term, MOS and POT are very sound business with sound management and balance sheets. They are in no risk in going out of business, and fertilizer price is a good hedge against inflation. (Laugh) POT is about 3% of my portfolio, I guess this offsets the 15% one day rise of ATVI just a few days ago (which is the single one day largest gain I had seen laugh).
Unless this all blows over, and turns out to be a ploy by Russian oligarchs, I would count on a POT div. div history, they have cut the div. twice, from .02 to .01, and .03 to .02. In the beginning of 2011, POT was only paying .03. Since then they have increased it dramatically, at %30 and %50 clips, to where it is now, at .35. That level can't be sustained. Also consider that in periods of biggest share price declines 2008, and 2010, POT either cut or froze the div. I would not count on a 4% or 5% YOC dividend.
Well, I think the POT buyback is key for short term timing. They didn't buy shares in Q2 and it doesn't have regulatory approval yet. But it will soon. Probably alot of buying chi flat iron expecting them to go into the market in a few days. Note AGU's buyback is live with room and the stock has already rallied to down $3 and change versus down $10 in premarket as the retail actually benefits from lower K prices. It's at $41.76. Even Karnalyte which has a mining finance deal down 35%. IPI down 29% ouch.
The end user benefits. The farmer. Belaruskali was selling out of the agreement with Uralkali already all year which led to Uralkali picking up and leaving to replica Oakley sunglasses sell through their own Uralkalki Trading. So it's a threat. Not a reality yet. I am tempted but I have no stomach given 63% of gross margin for both companies comes from potash sales. I think down 20% is a fair number for EPS projections and the stocks are both trading exactly that. Mitigating this to some degree is that MOS and POT sell granular potash in the US whereas Uralkali is talking about international potash which is standard grade. Also, MOS sells K Mag a special formulation which gets a better price. Ditto for Intrepid. If you look at the corn and soybean crops in the USA looking great per yesterday's crop progress report that's a negative for fert demand in 2014.
Chris, Some great observations and insight as usual. Do you have any further thoughts on CF as I recall you had some rather negative thoughts a month ago as to whether there might be an ER miss. Seems possible you could be right, but have you revised the downside potential given the publicity yesterday and buy back possibilities lending support? I think CF do have some potash in Florida from memory (sorry if I am wrong) but are more nitrogen related and so does this make then a potential destination for funds pulled out of the potash guys or do you think they might also be tarred with the same brush vis a vis bad sector sentiment? I agree with you I would not have the stomach to buy Pot or MOS on this weakness, regardless as to whether the Russian situation is a threat or otherwise because sentiment will have been affected and the PE ratings have been chased to high for a long while anyway. Any bounce might be a dead cat bounce from those attempting to catch the falling knife and PT and Mos might settle down considerably lower over time. If one has to have sector exposure it seems that CF being lower rated is safer, as if it does miss Er, or go lower on negative www.michaelkorsoutletus.net sentiment its nitrogen dominance might help as there might be less percentage downside. Same principle might also apply to RNF Would be interested in your thoughts.
A few weeks ago I had CF pencilled in for Q2 at $7.59 and revs of $1.53 billion versus $7.73 and revs of $1.69 billion by the street. So I was doing well avoiding CF which was $179 recently. Then yesterday Loeb screwed all that up. I think they are probably wrong on their numbers and I doubt CF will delay their expansion or listen to them about the dividend. If you put out a statement like Loeb http://www.hvfull.com did, you have to figure he (we'll find out how much after the Q3 13 G) he should be buying more here and also his hedge fund buddies.