Bookkeeping: Adding Fertilizer

It's a trader's market.

I want more CF Industries (CF) ahead of earnings tonight (I rarely add ahead of earnings so this is a very risky move) - I'm adding CF Industries and Mosaic (MOS) exposure. CF is now up to 4% of fund and MOS back to 6%.

Preview on what they will punish CF Industries for (same reasons they punish TRA today)... higher natural gas prices. (which is an input for them). Now here is the logic. Natural gas is hard to transport, unlike crude - hence it is more of a local commodity as opposed to global. Hence natural gas ebbs and flows (in theory) with the US economy. So if you think the US economy weakens...then so should natural gas down the road. Since slowing economy means we need less. But, bears will say natural gas going through the roof, hence margins will be hurt in CF Industries business. Not realizing pricing power of these companies and how, much like a transport company they will maintain margins by passing along costs to their end customers. But logic like that cannot be used when we need to build a bear case against an industry. So fear the natural gas ...

Terra Industries (TRA) is a quite similar company to CF Industries so we can get a preview from their earnings out earlier today

• Fertilizer producer Terra Industries Inc (TRA.N: Quote, Profile, Research) said fourth-quarter profit rose six-fold, topping Wall Street expectations, helped by higher nitrogen selling prices.
• The company earned $69.7 million, or 66 cents a share for the quarter, up from $11.6 million, or 11 cents a share, a year ago. Revenue for the quarter rose 27 percent to $570 million.
• Analysts expected a profit of 64 cents a share, before items, on revenue of $539 million, according to Reuters Estimates.
• Nitrogen products revenue for the quarter rose to $554.1 million from $438.2 million last year. Nitrogen solutions selling prices improved 69 percent over last year, while ammonia prices rose 16 percent on stronger demand.
• "Nitrogen products selling prices remained strong as high commodity grain prices continued to support very healthy nitrogen demand," Chief Executive Michael Bennett said in a statement.
• The company forecast nitrogen prices will remain strong through 2008, but said natural gas prices will significantly affect product costs.

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I want more coal. Darn names won't pull back aside from Peabody Energy (BTU) which has some company specific issues. Waiting for some sort of panic to drive the others down... please?

Strangely, I want Walmart (WMT) too... and anything mortgage related.

Long CF Industries, Mosaic, Peabody Energy in fund; long CF Indusries, Mosaic in personal account