I Eat Bear

In times of rough markets, any stock is a gamble. When your stock is in a sector that is just being creamed, that just increases the gamble. But, by the numbers, Mosiac is due to rebound nicely.

First, let's examine the market it is in. It is a producer of agricultural products, namely potash and phosphates, used for fetilizers and animal food products. At least that is the bulk of what it does.

Since people and animals have to eat, it would seem the business will provide needed products, even in a financial downturn. Let's hope so, or a lot of us will be going hungry.

Mosaic is down significantly this year. It stock price has quartered since reaching it's 52 week high just a few months ago. It is now bouncing along a 52 week low. Since it is a sound business, that does put near the buy.

Since it is a sound company in a vital market segment, why not a buy right now? Simple. The markets will go yet lower. The global financial turmoil can do nothing else but cause more market drop.

It's major competititor is Potash. Another good company. It too is taking a beating right now. Both companies have sound profit margins (20+%), so about the only reason for the beating the stocks are taking is the global selloff of stocks in general. I think they should survive the demand destruction better than many sectors.

Look to buy with the Dow around 10,200. That may not be the bottom for the Dow by any means, but it will get you a hard to beat price you can be happy with.

The P/E is ridiculously low, under 3. I would like to see a better dividend, and have not ruled that out in the future, as many companies may be increasing dividends to maintain shareholder value. An improved divided may be a couple of years off yet though, as liquidity is going to be foremost on the mind of companies for many years to come.

Normally, I like company charts, and what I see in the charts would scare off the bravest of investors. The chart on Mosaic is not really worse than most others right now, but the spiral down has been more obvious than for many other companies.

What is safer than Mosaic? I still like Terra Nitrogen (TNH). Still in the ag fertilzer market, but the dividend on TNH makes it a superior buy in this kind of a market.

Things on the horizon for POT, MOS, and TNH? I think they will learn from this devaluation of their stocks, and rather than have stocks in the $150-200 per share range, when they get close to those, they will have stock splits. While they have no real effect on the stock value, it does give the opportunity to have more shares at work, even if you do divest a few shares over time.
As long as the company maintains a good profit, that can only be a good thing.

Mosiac is a wait right now. Mostly, for the other shoe to drop in the Dow, not because it is a bad company. It is a good gamble though, even if you feel compelled to jump in before the bottom, I don't think you will suffer too badly.

Comments: View Comments |  Friday October 3, 2008