Update Potash of Saskatchewan (POT)

09/22/2009 10:30 am EST


Jim Jubak

Founder and Editor, JubakPicks.com

Potash of Saskatchewan (POT) lowered its guidance for third quarter 2009 and full year 2009 earnings again on Monday, September 21. The company now expects earnings of $3.25 to $3.75 for the full year versus its previous projections of $4.00 to $5.00 and the Wall Street consensus of $4.16. Needless to say, investors weren’t amused and the stock finished 4.2% lower for the day.

I don’t think the news is especially surprisingly or terribly significant.

And it certainly doesn’t change the fundamentals: Potash inventories are down around the world (as far as we can measure them, which means outside of China) and farmers who have been stinting on applying potash of their soils during the downturn are going to have to add the nutrient to their soils soon or face serious drops in yield.

Anyone who owns Potash has (or should have) already written off 2009. You own this for the rebound in fertilizer demand that should kick in, by my estimation, in 2010. You know that getting in at or near the bottom of a very cyclical stock is an exasperating exercise in missed estimates and overly optimistic timing.

When I bought this stock for Jubak’s Picks on July 23, 2009, I wished I could have purchased it $10 a share cheaper than my $95.78 purchase price. Well, we may yet get a chance. I would use the current weakness (Let’s hope it runs for a few days more) as a buying opportunity. I can’t add more to the Jubak’s Picks portfolio—the book keeping of split positions is just too horrendous—but I will certainly look to buy more for more personal account if the price gets anywhere near $85 a share.

 As of September 19, I’m leaving my target price at $125 a share by extending my schedule to September 2010 from the prior June. (Full disclosure: I own shares of Potash of Saskatchewan in my personal account.)
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