Potash Corp. of Saskatchewan: Buy
Like all fertilizer companies, Potash (POT) has been absolutely hammered by falling prices tied to the supposed demise of the Eastern European cartel.
With the stock down 22% for 2013, the selloff is more than overdone, making this industry leader look like a bargain buy. For one thing, prices are close to bottoming out. That damage is done. Additionally, now that President Putin is involved, a resolution to the potash fight in Eastern Europe could be in sight.
Furthermore, Potash’s business has high barriers to entry. Phosphate has to be dug out of rock, giving this business mining-industry-type upfront costs. Long-term, that makes POT’s No. 1 position look unassailable.
Bottom Line: Shares have discounted all the bad news, making them look like a bargain. On a forward earnings basis, the stock fetches just 13 times earnings, or about a 10% discount to its own five-year average. Once the Russia situation is worked out, prices will bounce back, and so too will Potash stock.
As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.