Shaking off any weakness they can find...

We're talking about POT and MOS...

The most potent 5 year bull market in the entire market. It's amazing how quite things have been relative to AAPL, GOOG, NYX. Eerie in fact... maybe it's that PEG ratio of 2 on 10% estimated 5 year growth? Or the "must be a bubble" mentality. They've done a good job keeping it relatively hush but... still too many invested.

There has to be a way to shake off some of the weak hands... the recent drops play mind games with the largely trend following computers. I also read on the MOS message board that some people were so leveraged that the recent drops were causing margin call selling. Regarding being highly leveraged in this market: I think Forrest Gump covered that one. If you are I always say its ok to make a mistake once but 'you can't be fooled again.' Anyway...

Move along. Nothing to see here...
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Canpotex Announces Higher Spot Market Pricing
Canpotex confirms that it has now concluded significant volumes for shipment to Asian spot markets in the fourth quarter at a price level of USD 1000 for standard grade material ($1025 for granular grade). As a result, Canpotex is advising it's customers that all new sales for shipment through the balance of 2008 will be priced at these new and higher levels. The new pricing will also apply to all new sales to customers in Brazil and Latin America.

These new and higher price levels are supported by continued strong offshore potash demand and by the historically low potash working inventories that have resulted from record demand this year. These factors have created an extremely tight supply situation for potash and this supply/demand scenario is expected to continue into 2009.

The Prices were USD 265 in November 2007... Here's a blog on the subject

POT
#1 global potash fertilizer producer
#2 global nitrogen " "
#3 global DAP (phosphate based) " "

POT has 22% of the world's potash and is one of the only companies in the world stands to gain not only from increased potash prices but from the ability to rapidly increase production. For more click here.

• High barrier to entry (takes years and years to find potash and build mines)
  
• They've been waiting patiently and building up the company for this moment since the 80s
• Only company in the world that can double potash production in next 7-10 years.
  
• Equity interests in SQM and Chinese producers, helps sales closest to biggest customers
• Expect the next 5 years to be the most rapid growth in company history
  

CEO of POT:
It's going to be hard for anyone to compete with us.
Listen to the latest conference with the CEO of POT... blow your frikkin' mind.

MOS:
#1 Global DAG (phosphate based) fertilizer producer
#3 Global potash producer

Unlike most phosphate fertilizer producers, which have to buy the phosphate from Morocco, MOS mines its own primarily in the US and can enjoy the high selling price at a much lower cost.
Additionally, they have large Potash fields, though not as large as POT... I think Belarus Potash Corp is second.

Archived presentations by MOS
Please do you own DD...
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Fundies, technicals, and risk management.

Let's do a quick look at the fundies and technicals...
Assume a 5 year growth rate of 25% for POT and MOS. These numbers are still conservative. I'm also using round numbers here

POT
FY PE: 18
PEG : 18/25 = .72
FWD PE: 10

MOS
FY PE: 30
PEG: 30/25 = 1.20
FWD PE: 10

Charts and Technicals


Upward trend stalled, MACD bearish, just above lower Bollinger Band at 206 (shake shake shake)... double short-term bottom forming in this region
recent bottom support (below Bollinger Band): 198
major bottom support: 180
peak: 240

If we move up s before earnings I may sell a bit to lighten my position. In a market like this I often like to sell before earnings on a move up if the stock has run quite a bit. This stock has not... it halfway in between the 180 support and 240 resistance. It is cheap... I will not be shaken on moves before earnings. Only an earnings miss would cause downward pressure from these levels. I find that unlikely. However it is always possible. My exit price in such a situation is just below the lower Bollinger (206), support (198), or below major support at 180. It may be higher if the price moves up from here and then there were to be a miss. In such a case, depending on the circumstance, I may jump right in near support levels with a stop just below.



MOS
Very similar pattern to POT. Double bottom at lower Bollinger Band.
Again if the stock shoots up before earnings I will sell into this a bit. If not and there is an earnings miss the exit prices are just below lower Bollinger and support an next recent support at 119. Again I would look to jump back in as soon as the margin call selling and overreaction were to be flushed out, at key lower support areas.

Major Support :115 region
Peak: 160

I would normally not even consider selling these names at these prices but in a bear market such as this one in which the long and intermediate trends are going down the bears would have a short-term feast if anything missed. By cutting losses you preserve capital and can potentially pick shares up when the momentum and oscillators shift and the buying comes back in.

This is caution. This is a fire exit. You hope you never have to use it but it better be there if you need it.


"The Yellow Rose Street Beat" is for informational purposes only. It does not give investment advice.