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The Case for and Against PotashCorp

Do you know the risks associated with your stocks?

Stocks come with a good amount of uncertainty. If they didn't, we'd all have matching portfolios that are happily invested in all of the same stocks. But of course, the potential returns would be close to nil in that case, so having differing opinions is a key factor of our financial system.

If you ask two members of our Motley Fool CAPS community about the same company, chances are you'll get different opinions. Some will say a given company is the best; others will disagree. Each opinion has its merits, so taking the time to see both sides of a story will help you become a better investor.

With that in mind, we've gathered myriad investing insights from our CAPS community, where 110,000-plus CAPS members have contributed picks and commentary for more than 5,500 companies. Today, we'll look at some of the CAPS bull and bear cases for fertilizer and feed company Potash Corp. of Saskatchewan (NYSE: POT  ) .

Potash Corp.


CAPS Rating (out of 5)


Market Cap:

$55.3 billion

1-Month Return:


Source: Motley Fool CAPS, as of 8/5/08.

Bull case for Potash Corp.

Potash Corp. is the world's largest producer of potash, producing 23% of the world's supply. Potash is largely used as a source of potassium ('potassium-oxide') which is a key macro-nutrient (nitrogen, phosphorus, and potassium) required to produce fertilizer. Readily abundant sources of potash are concentrated in relatively few areas in the world and Potash Corp. controls 1/4 of it. They also have large interests in mining and production of all three macro-nutrients.


According to the 8K filed by [Mosaic (NYSE: MOS  ) ], potash and fertilizer demand are increasing despite record prices, while China will discontinue exporting resulting in reduced global supplies. This and [PotashCorp] are closely tied to grain prices which are (I believe) permanently inflated to current levels by the ethanol debacle.

CAPS members bullish on Potash Corp. are also bullish on:

  • Monsanto (NYSE: MON  )
  • Mosaic
  • Transocean

Bear case for Potash Corp.

Over valued in agricultural sector. Great growth but bad valuation today compared to others in sector. I'm bullish on [Agrium (NYSE: AGU  ) , Terra Industries (NYSE: TRA  ) , Andersons (Nasdaq: ANDE  ) ] today and bearish on [Intrepid Potash (NYSE: IPI  ) , Potash]. Neutral on [Mosaic] based on comparative valuations and each company's earnings potential the next 5 years.


This stock is flying high, too high IMO. The momentum is hypercharged and smells of Krispy Kreme. Try [Intrepid Potash] for cheap pot.

CAPS members bearish on Potash Corp. are also bearish on:

  • First Solar
  • Research In Motion
  • Apple

What's your take on Potash Corp.? Do you side with the bulls or the bears on this one? Plant yourself over at CAPS to voice your opinion -- it won't cost you a penny -- or add your thoughts in the comments box below.

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Fool sector editor Katrina Chan owns shares of Apple but of no other companies mentioned. The Motley Fool has a disclosure policy that happily resembles a Chia Pet.

Read/Post Comments (3) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On August 05, 2008, at 2:32 PM, sumfear1 wrote:

    The numbers are too good to ignore on potash, it may have needed a correction

    but i believe it has now been over sold.

  • Report this Comment On August 05, 2008, at 3:21 PM, edlwhite wrote:

    A very small portion of the world crops are actually devoted to ethanol production. POT seems to have been dropping in sympathy with the oil and general commodity price drops. However, the actual demand for potash and other fertilizers is relatively inelastic (and growing). The "bad news" from AGU today about their Egyptian nitrogen project being cancelled is actually good news for POT and MOS. They will have less competition in the near future. They will have more pricing power. They will not suddenly catch a "writeoff" fever. Their profits are going to keep rising on very solid merits. POT is currently around its 200 day moving average. If you were going to pick a technical point for it to rally from, this would be it. It merely remains to be seen if it can move against the tide of falling oil prices. Regardless, buying the stock at this point as a long term investment is probably a good entry point. I don't believe the US ethanol mandate will be cancelled. Even if it is, other countries have such mandates (Brazil comes to mind). Ethanol production from crops will continue at a high level. Again crops for ethanol production are a very small part of the overall fertilizer and Ag picture.

  • Report this Comment On August 06, 2008, at 6:20 AM, BSDFool wrote:

    Its difficult to give any credibility to someone who likes the less proven company with the higher PE because the one with the lower PE is "flying too high".

    Look at the graphs for POT, AGU, MOS, etc. They are exactly the same, with POT being the more favorable in terms of positive pct moves. To say you like one stock in this sector and not another is to simply not understand how money is flowing in the current market.

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