Lombardi: Stock Market Commentary & Forecasts, Financial & Economic Analysis Since 1986

Two Stocks to Benefit from Accelerating Fertilizer Demand

Thursday, May 3rd, 2012
By for Profit Confidential

Chinese economy The recent mild winter in the U.S. is providing farmers a unique opportunity to profit from high agricultural commodities prices due to adverse weather in other parts of the world. In addition to world demand for food continuing to increase, the mild winter has allowed farmers to plant crops at one of the earliest recorded times over the last several decades. Agricultural commodities can be fickle, based on weather and various inputs such as fertilizer. U.S. farmers are certainly going to try to profit by obtaining as high a yield as possible for their agricultural commodities. This will mean, in my opinion, increased use of fertilizer this year.

Chinese economy

www.StockCharts.com

In its recent fourth-quarter report, The Mosaic Company (NYSE/MOS) announced that potash and fertilizer volume should increase at a faster rate than it expected, as demand is stronger than earlier guidance. Sales of agricultural commodities have increased to overseas markets, including China, other regional Asian countries, and South America. This demand is driving farmers to use larger levels of fertilizers and potash. While earlier estimates had fertilizer companies earning less, as farmers initially balked at the higher prices potash firms demand for their fertilizer, it now appears that demand is picking up after all.

Mosaic is also doubling its dividends, to a total of 12.5 cents a share from five cents a share. The company had $3.2 billion in cash at the end of February. It is generally a positive sign when companies increase dividends. If a potash producer like Mosaic feels so comfortable in doubling its dividend, then the future is most likely brighter than we anticipate for other fertilizer producers.

inflation rate

  • The Two Most Important Pictures Investors Will See This Year

    Within the next 90 days, a new economic catastrophe will be headed our way.

    It will blindside most Americans. And this time, the government and the Federal Reserve will not be able to help.

    It will cause a surge in personal bankruptcies and massive layoffs. It will make the recession of 2008 pale in comparison.

    It will crash retirement plans: I'm talking stocks, bonds, maybe even your own bank account.

    To get a firsthand look at what we're so worried about now, a catastrophe that has already been set in motion, I urge you to...

    See the two most important pictures investors will see this year FREE when you click here.

www.StockCharts.com

Intrepid Potash, Inc. (NYSE/IPI) is another fertilizer producer that recently issued preliminary guidance for this year. While full quarterly release won’t come until the early part of May, Intrepid Potash estimates production of 215,000 to 225,000 tons of potash. The firm expects that the existing supplies of potash held by retailers will be diminished by the second quarter, and expects a pickup into the second half of the year. The average sale price per ton is expected to be $470.00-$480.00, with Intrepid Potash having a cost of $190.00-$200.00 per ton.

Intrepid Potash trades at a forward price-earnings ratio of just over 14, with a price/earnings to growth ratio of 0.27, which shows that the stock might be undervalued. The profit margin is 27.31% and the operating margin is 40.28%. The company appears to be well-managed. Intrepid Potash has over 176 million in cash and essentially no debt.

As we can see by the three-year weekly chart of Intrepid Potash, it is now bouncing off a higher low and is above the median downtrend line. While there is overhead resistance for Intrepid Potash, the current market appears to have some renewed bullish interest from investors. Mosaic is also showing a wedge formation over the last two years, with upward sloping moving average convergence/divergence and Relative Strength Index. While neither one is an outright buy at this stage, they are certainly stocks I would pay attention to over the next several weeks, as they could become bullish. Confirmation would need to come with a breakout up away from the top downtrend line in each case.

VN:F [1.9.22_1171]
Rating: 0.0/10 (0 votes cast)
VN:D [1.9.22_1171]
Rating: +1 (from 1 vote)

This is an entirely free service. No credit card required.

We hate spam as much as you do.
Check out our privacy policy.

Sasha Cekerevac - Investment Advisor, Fund AnalyzerSasha Cekerevac, BA Economics with Finance specialization, is a Senior Editor at Lombardi Financial. He worked for CIBC World Markets for several years before moving to a top hedge fund, with assets under management of over $1.0 billion. He has comprehensive knowledge of institutional money flow; how the big funds analyze and execute their trades in the market. With a thorough understanding of both fundamental and technical subjects, Sasha offers a roadmap into how the markets really function and what to look for as an investor. His newsletters provide an experienced perspective on what the big funds are planning and how you can profit from it. He is the editor of several of Lombardi’s popular financial newsletters, including Payload Stocks and Pump & Dump Alert. Add Sasha Cekerevac to your Google+ circles

The Great Crash of 2014

A stock market crash bigger than what happened in 2008 and early 2009 is headed our way.

In fact, we are predicting this crash will be even more devastating than the 1929 crash…

…the ramifications of which will hit the economy and Americans deeper than anything we’ve ever seen.

Our 27-year-old research firm feels so strongly about this, we’ve just produced a video to warn investors called, “The Great Crash of 2014.”

In case you are not familiar with our research work on the stock market:

In late 2001, in the aftermath of 9/11, we told our clients to buy small-cap stocks. They rose about 100% after we made that call.

We were one of the first major advisors to turn bullish on gold.

Throughout 2002, we urged our readers to buy gold stocks; many of which doubled and even tripled in price.

In November of 2007, we started begging our customers to get out of the stock market. Shortly afterwards, it was widely recognized that October 2007 was the top for stocks.

We correctly predicted the crash in the stock market of 2008 and early 2009.

And in March of 2009, we started telling our readers to jump into small caps. The Russell 2000 gained about 175% from when we made that call in 2009 to today.

Many investors will find our next prediction hard to believe until they see all the proof we have to back it up.

Even if you don’t own stocks, what’s about to happen will affect you!

I urge you to be among the first to get our next major prediction.
See it here now in this just-released alarming video.