Thursday, April 24, 2008

Bookkeeping: Replacing my Fertilizer Sales from Tuesday

Tuesday, I cut my last batch of fertilizer and took my holdings to the bone [Apr 22: Cutting More Fertilizer] - I got a lot of criticism for selling ;) I wrote

I know I said I wouldn't cut more, but I am going to cull more Mosaic (MOS) and Potash (POT) as they are relentless in their upswing and at this point nowhere near any support levels. Usually a significant event like a new IPO in the sector or a large buyout marks a near term top in a sector - I am not saying this Intrepid Potash (IPI) IPO is the thing, but I have not seen a level of bullishness in a sector as I've seen here, since the solar days of fall 2007. Even Neil Cavuto was talking about the Intrepid IPO last night. That scares me, and when these things reverse I'm going to call it the Cavuto top (granted, he did not know how to pronounce "potash" either).

I am going to cut more Mosaic here @ $140, and Potash @ $212. Granted, every sale the past 2 weeks has been a "mistake", but it's just way too bullish around here, and while I expect a blowout number from Potash on its earning reports, so does everyone else - and the natural inclination is a sell off sooner rather than later. I'll look to
rebuy both lower - Potash maybe in $180s and Mosaic maybe $120s. I'm taking both positions sub 1%. (gasp)

Well, now we are getting those prices, Mosaic in $122s, and Potash in $188s. So I am simply replacing what I sold 48 hours ago, plus some extra for Mosaic. I am not going hog wild yet, more downside could be coming but I was at dramatic lows in terms of fertilizer exposure anticipating a "sell the news" reaction which we got this morning. I am hoping for more downside, and anticipating a lot of people who jumped in recently will perhaps begin to panic, 1 of the 4 potential near term downsides I outlined yesterday [Potash hits $1000 on Spot Market] In this case I was able to lock in gains, and buy back my shares for 13% lower in Mosaic and 11% lower in Potash - thats where the Trader part of TraderMark comes in handy ;)

Technically, both now have fallen nicely to their 20 day moving averages. Just for kicks the 50 day moving average is $114 for Mosaic and $170 for Potash; if we get there I'll be going to 6%+ type of allocations. As always, I scale IN and OUT - I never hit the top nor the bottom. Some of the purchases today might be money losers in the next week or month, but they will be winners in 6 months.

For now Potash is 1.2% of fund; Mosaic 2.9% of fund - I still prefer the valuation in the latter. And I anticipate a lot of people late to the game who piled in the past week, and who don't understand the long term story, might be panicking and I get better prices in due time. If not, I'll pay up - my mental fair value has been MOS $200 and POT $250 by end of year.

Long Mosaic, Potash in fund; long Mosaic in personal account

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