1 Company Stands Out for Investors Planning for 2014

The $20 billion global potash market is in flux as a result of a breakup of one of the world's largest potash partnerships. In response, industry giants Potash Corp. of Saskatchewan  (NYSE: POT  ) and The Mosaic Company (NYSE: MOS  ) are undertaking a number of initiatives designed to buoy profits until the decline in potash prices reverses. Potash Corp. recently announced it would reduce its global workforce by 18%. In addition, both Potash Corp. and Mosaic are turning to $2 billion apiece in share buybacks to incentivize shareholders to hold on through the downturn.

Both Potash Corp. and Mosaic could be strong turnaround stocks, should the outlook for global potash improve. However, industry watchers can avoid the storm altogether by considering a company that isn't hurting from potash.

What needs to happen for a healthy potash market
Several things need to go right for Potash Corp. and Mosaic to get back to growth next year. First, China needs to resume consumption of potash. China is a major potash buyer, but tapered off potash purchases as prices have declined, apparently waiting on the sidelines for prices hit a floor. By contrast, Potash Corp. sees strength in North America, where demand is strengthening and shipments are expected to rise in 2014. Unfortunately, Potash sees sluggish growth from China next year. Next, the breakup between Russia and Belarus, which is the major contributor to collapsing potash prices, needs to end.

If the stars don't align, Potash Corp. warns investors that the already-weak conditions could get even worse next year, a disappointing outlook for those who were hoping for a quicker turnaround. Potash Corp. is the world's largest fertilizer producer by capacity and potash represented 38% of the company's net sales in the third quarter, so clearly it's got a lot to lose from further deterioration of the potash industry. Consider that Potash Corp.'s sales of nitrogen products are flat through the first nine months of 2013, but potash sales are down 14% in the same period.

A smoother outlook for CF Industries
While the global potash industry is in a state of upheaval and Potash Corp. and Mosaic resort to workforce reductions and share buybacks to keep profits afloat, investors might want to consider CF Industries (NYSE: CF  ) instead. That's because CF industries operates in a different corner of the fertilizer market than Potash and Mosaic and isn't seeing business deteriorate nearly to the extent of its two peers.

CF Industries is heavily oriented toward nitrogen fertilizer, an initiative the company first began in 2005. This has clearly paid off since CF Industries has doubled its nitrogen product sales since 2005 to nearly 13 million tons. CF Industries also committed to low-cost feedstock, and margins have soared. Consider that the company realized an 11% gross margin in 2005, while that figure stands at 46% over the last twelve months. Of course, rising natural gas prices could have something to say about that.

Going forward, CF Industries plans to keep optimizing its product offerings. It plans to continue expanding its nitrogen production capacity, while also divesting its phosphate operations. CF Industries is in the process of investing $1 billion committed to nitrogen projects by the end of the year. In the near future, CF Industries will be a nitrogen pure-play.

Global potash upheaval leads to an uncertain 2014
Potash and Mosaic are well-run businesses, but the breakup of one of the world's largest potash partnerships has caused both companies to see underlying conditions suffer over the past year. While it may be likely that the damage is fully priced in to their stocks, which have suffered throughout 2013, it's not clear that Potash Corp. or Mosaic will see their turnarounds materialize next year. Several headwinds still remain, which need to be resolved if Potash Corp. and Mosaic are to be strong turnaround plays.

On the other hand, CF Industries has the wind at its back in the form of a more opportune product mix. CF Industries will soon be all-nitrogen, meaning investors have a better near-term outlook ahead. For investors unwilling to bet on potash, consider CF Industries.

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