Portfolio fertilizer: Potash is on the move
Today's Financial News - Posted July 2, 2009
The potash market is looking strong today thanks to news of increasingly positive supply and demand fundamentals. Potash Corp. (NYSE:POT) is leading the charge.
By Andrew Snyder, TodaysFinancialNews.com
Baltimore – (TFN): Even in day filled with less-than-stellar economic data and enough stocks trading in the red to pull the perma-bears out of hibernation, there is cause for optimism.
Today it comes from the companies that have anything to do with the world’s potash market.
Thanks to news that a key Russian producer is raising its prices due to increased potash demand, American firms like Intrepid Potash (NYSE:IPI), Potash Corp (NYSE:POT) and Mosaic (NYSE:MOS) are making strong gains.
The news is yet another strong indication of the profit potential currently held by the world’s commodities market. First we saw gold prices soar. Then oil. Then silver. And now potash prices.
Next up is your portfolio balance
As the world bounces out of this recession, demand will rise, inventories will fall and prices will naturally go up. The companies that directly see their margins rise as they pull materials from the ground will reward their shareholders with increased revenues and earnings.
Out of the three companies mentioned above, Potash Corp. is the largest. With 2008 revenues of $9.5 billion in 2008, it has the power to leverage strong gains in the potash market into strong profits for shareholders.
In an industry where size matters, Potash is king.
While today’s surge does not make this the greatest time to enter a position, a weak and volatile market over the next couple of weeks will create opportunities to enter a play.
Shares of the company have already doubled since their November lows of $47.54. But even at current prices of $97.75, there is an opportunity to rack up double-digit gains over the next few months.
Investors must be prepared to see trading resistance at the psychologically important level of $100 per share. As long as the bears are threatening to attack, prices will remain volatile anywhere close to that price.
The action will force buy-and-hold investors to pull out their hair. But short-term traders will take advantage of the action to make fast in-and-out moves.
The commodity markets are alive and well these days. They may look different than just a year or two ago, but if you are into making money, there are few better places to get the job done.
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