Epiphany Investing

Searching Out the Optimal Portfolio of “Revelation” Stocks

Potash Stocks Still On Sale

Posted on | September 4, 2008 Time: 11:12 am |

I published an article last week that outlined my forecast for the potash/fertilizer kingpin stocks Potash Corp. of Saskatchewan (NYSE: POT), Agrium (NYSE: AGU), and Mosiac (NYSE: MOS). My core thesis remains that the Ag/Oil dance, which has been intimate in their price movements, will start to break down. Potash, nitrogen, and the like are driven by global food demand, specifically a broad-based transition to protein-based diets, which require kilo multiples of grains and feedstocks to produce.

Market Timing Angst

The markets quite effectively laughed off my comments, as these stocks can now all be picked up 10-15% cheaper than when my report first hit the feeds. For the moment, the dance continues. Futures prices for corn, wheat, and soybeans took a nosedive in the past few sessions, right along with oil, gold, natural gas and nearly every other hard or soft commodity. The “global growth is slowing” sentiment is gaining steam, as is the “commodity bubble” sentiment. For now I’m not buying it, instead giving my weekly snicker to the pundits and entertainers that have incessant needs to justify every move, every shift, every day.

The Trade Had Gotten Too Easy

I do think that speculators had crashed the party in crude oil and other commodities, stuck around because it was easy and profitable, and in the past few sessions have decided to explore new territory, maybe to the short side of commodities, maybe somewhere else entirely. They were resting just above the tipping point, and probably had a good bit to do with the last $45 dollars of crude oil gains heading into July.

Ground Control to Secular Trends - Are You Still Intact?

While I’m not as bullish as say, Jim Rogers on global commodities, I think the argument for higher prices makes good sense. Meanwhile the case for falling or even flat prices over multi-year time horizons seems like lunacy. If that happens, then the whole of economics will turn out to be even more dismal than we already knew it to be.

Potash has 50+ years of reserves in a deposit that can’t be synthesized or replicated, has large time and cost barriers to entry, and limited players with the resources to compete. Management has been patiently waiting 20 years for this period in time, when available farmland per capita finally became a limiting variable. I think we are in the second or third inning of this affair. Take a gander of Potash Corp’s investor presentations here to see how compelling the long case truly is; I highly recommend the “2008 Overview” slideshow.

Parting Thoughts

It appears that Potash Corp. will be purchased for the Epiphany Investing Secular Trends Portfolio. The initial sector allocations will be posted shortly, as will ongoing position and performance metrics.

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