• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Bruce Kamich
    • Doug Kass
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • Trifecta Stocks
  1. Home
  2. / Investing
  3. / Basic Materials

It's a Great Time to Buy Some POT

Potash Corp. has dropped more than 50%, but has good fundamentals.
By MIKE NORMAN Oct 01, 2015 | 12:00 PM EDT
Stocks quotes in this article: POT, TNH, CF, AGU, MOS

I like fertilizer company Potash Corp. (POT) at current levels, and I'll tell you why in a minute.

But first, let me just say that when I buy stocks, I'm a value investor and contrarian -- which means I like companies that have positive earnings but are cheap to purchase. In other words, I look for stocks whose prices have come down substantially from where they were one or even two years ago.

I like Potash because it fits those criteria. It's cheap on a price-to-earnings basis, while the stock is currently trading at around $20 a share -- very far down from the roughly $47 it sold for back in February. That's a big discount.

The company's earnings are also positive, as is the forward outlook for them. And get this -- POT  pays a 7.5% dividend!

Sure, it's been hit by commodity prices' collapse, but that's another reason why I like it. It's a contrarian play on commodities. You're buying cheap.

Now, a lot of investors like buying stocks when shares are cheap but the companies themselves are losing money. But I don't. After all, losing money is a serious problem.

Some companies might turn those around losses, and I guess some folks like to play the turnaround game. But I don't, because losing money can and often does create problems that aren't so easy to emerge from.

On the other hand, companies that still manage to make money in a poor growth environments (Potash's revenues have been shrinking) look like well-managed businesses in my book.

What about Potash's competitors? Well, Let's check them out:

  • Terra Nitrogen (TNH) has very little volume, so I'd stay away.
  • CF Industries (CF) fits all of my investing criteria. The stock has taken a real shellacking in just the past three months, falling 34%. CF also pays a decent dividend of almost 3% -- not as high as Potash, but still decent. Forward earnings estimates are also positive, while the P/E is a reasonable 11.5.
  • Agrium (AGU) doesn't look too bad. The stock is off about 23% from its highs earlier this year, but it's still an $80 stock and that might be too much for some folks. In addition, it has a somewhat higher P/E of 16. I generally don't like to go over 15x, as that represents an almost 7% earnings yield. On the plus side, AGU pays a 4% dividend.
  • Mosaic Co. (MOS) is another agricultural-chemical company that's gotten clobbered. The stock is down about 44% since the spring -- but like the others, it has compelling metrics and pays a dividend. But MOS just settled U.S. environmental regulators' claims by agreeing to pay a relatively small fine of $8 million, but spend another $170 million on cleanup and create a $630 million trust to pay for one facility's closure. That clouds the earnings outlook. However, results should still remain positive (albeit significantly reduced) even with those measures.

As for Potash -- my personal favorite -- there's another reason why I like it: it's a Canadian-based company. That means it's not only a good value stock, but also a good play on the Canadian dollar.

As a long-time forex trader, I think the Canadian dollar is really beaten down and due for a rally. That could help Potash's stock outperform its U.S.-based competition, although I should note that Agrium is also a Canadian firm.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

At the time of publication, Norman was long POT, although positions may change at any time.

TAGS: Investing | U.S. Equity | Basic Materials

More from Basic Materials

Commercial Metals Is Poised for an Upside Breakout

Bruce Kamich
Dec 28, 2021 11:45 AM EST

Let's review the charts and indicators.

Martin Marietta Looked Bullish Even Before Getting an Upgrade

Bruce Kamich
Dec 17, 2021 10:20 AM EST

Here's our updated trading strategy and price targets.

Masco Surges -- but Is It a Buy?

Bruce Kamich
Nov 16, 2021 1:39 PM EST

Traders and investors looking for a building products name to add to their portfolio could go long MAS around this level.

History Says Enthusiasm About Infrastructure Spending Should Be Tempered

Bret Jensen
Nov 10, 2021 8:30 AM EST

It could be a few years before construction projects that receive money from the latest federal infrastructure infusion get off the ground.

Dividend Investors Listen Up: We Are Living in a Materials World

Bob Ciura
Oct 29, 2021 11:00 AM EDT

Give your portfolio some credit and see which of these materials companies gets your interest: BHP Group, Dow Inc. or LyondellBasell.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 09:49 AM EDT JAMES "REV SHARK" DEPORRE

    This Weekend on Real Money

    Stop Wishing, Hoping, and Praying and Take Control...
  • 07:59 PM EDT PAUL PRICE

    Very Good Quarterly Numbers From Bassett Furniture (BSET)

    Bassett Furniture blew right through analysts es...
  • 04:41 PM EDT PAUL PRICE

    First-Half Results - Putrid; Second Half Results - Likely to Be Much Better

    It's great that we're done with June. 2022 mark...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2022 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login