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Potash: Growth from Fertilizer
08/30/2013 7:00 am EST
Investors are abuzz about macro economic events. Among them are "When will tapering begin?", "When will QE end?", and "Who is going to be the next head of the Fed?" points out Russ Kaplan, editor of Heartland Advisor.
Regarding all of these issues, I can only guess what will happen, like everyone else. Despite this, Wall Street analysts and the financial press are spending countless hours trying to predict the answers to these lofty questions.
In my opinion, speculation does not prove helpful when investing. Instead, I am going to follow the Buffett rule of searching for good, financially solid companies, which I believe are selling for a reasonable (undervalued) price.
These concrete factors have the most impact on how a company's stock price is going to behave in the future.
The answers to these concerns would not affect my investment decisions. Rather, I buy shares of financially solid companies, instead of speculating on macroeconomic events.
Our latest recommendation, Potash (POT), is about as exciting as manure—because that is exactly what it is.
Potash is a Canadian company, founded in 1975, and based out of Saskatoon, Saskatchewan. It is the leading producer of fertilizer throughout the world.
They also have operations in the Middle East, Far East, and South America. Although it sounds like a mundane company, it produces a very necessary and life-giving product.
As basic as it sounds, manure makes plants grow, including crops, which help feed the world. According to all the measures I use to determine whether or not a stock is worth the investment, it is a financially solid company.
Potash is a well-run company with a financial strength that the Value Line publication rates at A+, its highest level.
The stock is trading near its lows of the year (the low $30s) even though the stock market in general is high.
A major reason for the stock declining in price is the recent dispute with the Russian government. I believe this situation is temporary, and should have no effect on the company in the long run.
Potash has had these disputes in the past and they have been resolved. On the outside chance they don't, Potash can survive without Russia.
Potash will also give you an almost unheard of and safe 5% dividend while you wait for the stock to rise. This is a particularly high dividend, and unlike bonds, this company has a history of raising dividends.
Potash's board of directors owns a large amount of stock, which gives them the long-term perspective that any company needs.
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