- We've been watching Apple (AAPL) [Mar 26: Apple now at Inflection Point] and said we'd be buying over mid $140s - which we are now - so we buy. In my old days I'd be afraid of buying with Research in Motion reporting but in socialized markets there is nothing to fear but fear itself.
- Infrastructure Shaw Group (SGR) - no idea why this stock has been trashed, continue to add
- Fertilizer Mosaic (MOS) and Potash (POT) - Mosaic's chart could be a case for a short seller, but the best fundamentals out there. Maybe they will say something conservative and it's leaking out and that's why we have this weakness - or maybe its just hedge fund liquidations. Either way I see materially higher prices in a year.
- Iron ore Cleveland Cliffs (CLF)
- Russian steel/iron ore/coal Mechel (MTL)
- Oil service Core Laboratories (CLB)
- Brazilian homebuilder Gafisa (GFA)
- Mexican homebuilder Homex (HXM) - I want every homebuilder in the world in my portfolio now - free money for everyone
- Kinross Gold (KGC) - just a touch
- Powershares DB Agriculture Fund (DBA) - just a touch, will add more north of $38.50 if we get there
Disclosure: I don't trust a single buy above and if the S&P 500 breaks below 1350 I will disavow every word I typed above, erase this entry, and simply put up the word's April Fool's, and go back to bashing early cycle stocks.
Disclosure: If we stay above S&P 1350 I will erase the disclosure above and invite everyone to my pool party in which the pool is full of cherry Kool Aid.
Disclosure: On Realmoney.com, Jim Cramer has called this the bottom @ 2:53 PM, his 9th such call since October 2007. You know what they say, if at first you don't succeed try, try, try, try, try, try, try,try, try again. (that's 9 tries for those counting at home). Or is it "the 9th times a charm"?
Long all names except Lehman Brothers and Fannie Mae in fund; long Mosaic in personal account
8 comments:
you're inkling about some info about a possible earnings miss on mos is out. Simply from the standpoint of portfolio theory, it seems like if you own the fertilizers, you need to have a tiny bit of mon, in case there is a swap to corn, and dba, in case there is drought.
Not really thinking of any misses
Just a case of expectations
My fear with any stock once it is discovered is expectations become too high. With the price increases they are getting they will have good news all around - its just a matter of what are expectations
In the past these companies report blockbuster earnings and sell off - and that was even when they were 30% as popular as they are now. Part of investing is knowing the herd you are in the stock with. I always get antsy the more of the momentum herd that join in.
That said, its only a short term concern.
MON I have always found to be expensive but they are raising guidance at a good clip. I did begin rebuilding DBA today. But hoping for lower prices.
With fertilizer I am ok either way - if they sell off I am going to load up. If they take off, I benefit in the near term. Thats the nice thing about long term secular trends. You win in the end.
Oops I see the news you are talking about from the Citi guy
Hmm interesting
I am breaking a lot of my own rules here
#1 analysts usually dont downgrade the week of earnings unless they are in the know - thats bearish
#2 chart is degrading - thats bearish
Well should shape up as an interesting report. I do agree on the nat gas issue but that should hurt a CF far more than a POT or MOS. As for the crop report and all that, its just a very American centric point of view. People in this country need to wake up to the fact that there are other countries out there.... just like they scratched their head for 4 years why oil keeps going up when US inventories are flat or increasing. Just like they assume inflation goes away once the US economy slows.
We have a very inward looking attitude in this country; and its reflected in a lot of the analysis.
That said, natural gas is the one bugger in the fertilizer story - I thought it was a risk last quarter but they seemed to pass along all the increases. We shall see, earnings season is always full of land mines - no different. As I always say, this was a much easier sector to invest in a year ago when it was ignored by the masses. Now as so many people move in, the risks get heightened.... just like the solar stocks.
I see.. i guess add a little natgas exposure to the list, if you want to own the fertilizers. Ultimately, its getting harder and harder to hold the 'optimal' portfolio, if I have to keep buying all the hedges. I'm feeling more and more inclined to scale away from the stocks, and go right to the underlying crops.
As for the chart, I think mos and pot look like bull wedges. I wish it had come on decreasing volume, which concerns me a bit. They are down afterhours, but if we are talking about a long term thesis, it might mean being able to buy lower. But I have a decent size exposure of the canpotex cartel and I would gladly buy lower, if I could unload some a bit higher first; and you know as well as I do, that they 'woodshed' the stocks that miss now.
you could be right about the natgas. Its been seeing strength recently, and more so, in the past 3 months. spot prices havent been this high, since 05. Perhaps this citi analyst is viewing the same thesis. shouldnt that ultimately transfer to higher crop prices? This is odd.. we use fuels to grow food, to create fuel. What are we trying to accomplish again?
do you think its better to get out of MOS and POT temporary at the current price, to get in lower again, after earnings?
or is there a chance for MOS to rise back to 120 in april already?
about the natural gas prices, looking at the fertilizer products it seems it would be not a bad idea to shift from MOS to POT, dont you think? i think the production/mining of potash shouldnt be affected by natural gas prices?
Cramer will get it right one of these times... if not the 9th call, maybe the 10th.
Looking forward to partying in your cherry Kool Aid pool. After I make money on my shorts, of course. ;)
BD
Hey Mark,
I don't know if you watched Fast Money last night but a viewer (Chuck) wrote an email attributing the monster rally yesterday to the fact that it was Tuesday!! I found that to be extremely hilarious. No doubt Chuck is a reader of your blog, or your pseudo nickname for making anonymous comments ;)
I tried to find the video online in Fast Moneys website but it seems they cut out that section.
Surya,
POT v MOS - it is misleading to just go by their names. They are similar companies and broad based fertilizer companies exposed to all 3 nutrients. The advantage they have is the potash which most fertilizer companies do not have and is why I focus on them - it must be mined and not a "chemical process" per se. So there is really no difference other than the name. And the fact in the long long run POT has sizeable expansion capabilities.
I would advise someone to never buy a new position ahead of earnings - there are 4 outcomes of earnings and 3 of them are bad. Hence the odds are always against you. In the riverboat gambler society we have in investing people love to buy ahead of earnings to get the big score. But over the long run its a losing proposition. Personally I love earnings season for the new information but hate it for the investor knee jerk reaction. You have 4 outcomes
1 - beat earnings and give good enough guidance to satisfy everyone = the stock goes up
2 - beat earnings and give good guidance but its not "good enough" = the stock goes down
3 - meet earnings = stock goes down
4 - miss earnings = stock goes down
So you see you don't have good odds. Now that is the case for popular stocks with a lot of new money who chases stories. In beaten up stocks you can have gains in all 4 cases, i.e. "well they only wrote down $13 billion! That's nothing!! We expected $18 billion! Party!"
My worry has nothing to do with the fundmanetals - the stocks sold off last earnings for the exact same reason; sometimes for a few hours and then rebounded. People overreact to every little thing and with so much new money that doesnt really have any conviction in their holdings they sell at the first whiff of pain. And that leads to more selling etc. So as a stock gains more critical mass and more panicky type of people pile in who dont have conviction they sell at a moment notice. Truthfully when I read Yahoo message boards I think most people never read an earnings release - they look at the headline and they sell/buy off that. Nothing else. It is lazy. But thats the market nowadays and why you have stocks sell off 30% when a company "does not guide high enough" even if their year over year is growth is 70%. It's always an expectations game and I think that was confuses people new to the market.
Any costs will be passed to the customer - this is a shortage type of market. But knee jerk reactions will happen and people will look for any sign of weakness no matter how ridiculous as a reason to "call the end of the growth story". I always prefer quiet bull markets - fertilizer a year ago was much easier. Now that its popular and infected with tons of people who know little about the market other than "hey it's going up, it must be good" it turns into a momentum trade and nothing else.
Anyhow we still have 48 hours so we'll see how it goes. The ag stocks are weak as people seem to be rotating out, and sell the news. But in 12 months the prices today, whether it be $80 or $120 will seem like bargains. But in today's ADD world 12 months might as well be 12 years.
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