While I thought potash was the main driver of these fertilizer stocks it appears phosphates is showing even more near term growth. While potash is the more secure (wider moat) piece of the puzzle, the near term dynamics for phosphates are better than I anticipated if the Mosaic (MOS) data is a proxy for the industry. CF Industries deals heavily in nitrogen and phosphates so I will increase my exposure in the name.
CF Industries is trading at 15-16x 2007 and 2008 estimates as analysts currently have very little growth pegged into the 2008 numbers. If the phosphate market is as constrained as it appears, these 2008 estimates will need to go up. Overall I still prefer Mosaic since it has the mix of potash and phosphates, but now we see an opportunity for a surprise from CF Industries in the upcoming quarters.
Long CF Industries and Mosaic in fund; no personal positions
