Mosaic Shares — 3 Pros, 3 Cons

by Tom Taulli | October 3, 2011 11:25 am

Mosaic Shares — 3 Pros, 3 Cons

With investors on edge, companies cannot afford to disappoint. Take a look at fertilizer-maker Mosaic (NYSE:MOS[1]). Last week, the company reported a 77% spike in earnings to $1.17 per share. However, the Street consensus was for $1.29. As a result, MOS shares plunged by nearly 10% to $48.97.

Mosaic’s return for 2011 is a horrible -35.67%. This certainly is in stark contrast to 2009 and 2010, when MOS shares returned 76.97% and 28.18%, respectively.

So might Mosaic’s huge drop-off have created a buying opportunity? To see, let’s take a look at the company’s pros and cons:

Pros

Cons

Verdict

Even with a low valuation, Mosaic faces some big headwinds as the company’s costs should remain a problem and demand is likely to trail off. Interestingly enough, according to a recent report from the USDA, corn stockpiles have surged. Thus, if there is a hit to farmers’ income, it could mean fewer purchases from Mosaic.

So while the long-term prospects still look bright for the company, there could be more trouble ahead for investors. In other words, the cons outweigh the pros on the stock for now.

Tom Taulli is the author of “All About Short Selling”[5] and “All About Commodities.”[6] You can also find him at Twitter account @ttaulli. He does not own a position in any of the stocks named here.

Endnotes:
  1. MOS: http://studio-5.financialcontent.com/investplace/quote?Symbol=MOS
  2. POT: http://studio-5.financialcontent.com/investplace/quote?Symbol=POT
  3. BHP: http://studio-5.financialcontent.com/investplace/quote?Symbol=BHP
  4. AGU: http://studio-5.financialcontent.com/investplace/quote?Symbol=AGU
  5. “All About Short Selling”: http://www.amazon.com/All-About-Short-Selling/dp/0071759344/ref=sr_1_1?s=books&ie=UTF8&qid=1302184310&sr=1-1
  6. “All About Commodities.”: http://www.amazon.com/All-About-Commodities/dp/0071769986/ref=ntt_at_ep_dpi_10

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