Potash stocks may sound like a boring investing proposition, but one glaring fact should make you sit up and take note of the industry: The United Nations projects the world population to jump by one-third to 9.7 billion by 2050. That also means a dire need to grow more crops to meet the rising demand for food even as arable land shrinks. Enter potash -- one of the world's three most widely used nutrients in fertilizers that can boost soil fertility and crop productivity.

Potash's role in helping the imminent food problem forms a strong investment thesis for potash stocks. The U.S. potash markets are presently ruled by three companies: Potash Corporation of Saskatchewan (POT), Mosaic (MOS -0.51%), and Agrium (NYSE: AGU). They are also the only members of Canpotex, one of the world's largest marketing associations that handle all potash exports outside the U.S. and Canada. Such is the significance of potash in agriculture that mining giant BHP Billiton, too, would've been a major potash player today if it didn't have to put the brakes on its Jansen potash project in the wake of an industry downturn.

After a struggle that lasted several years, the potash industry finally appears to have left the worst behind. Potash prices are stabilizing as demand from key international markets is catching up to supply, thanks to the collective efforts of leading manufacturers like PotashCorp and Mosaic to curtail production over a period of time. The time looks right to get some potash stocks back on your radar, but make no mistake: Not all stocks may be worth your money. Case in point: Intrepid Potash (IPI -5.93%). But before I explain why Intrepid Potash may not be worth your money, let's check out the investment-worthy potash stocks first.

A woman holding fertilizer in her hands.

Potash's key role in crop productivity forms the investing thesis for potash stocks. Image source: Getty Images.

The first choice among investors in potash stocks is arguably PotashCorp, and for good reason. Aside from its potash namesake that strikes with investors, PotashCorp also offers maximum exposure to investors interested in the nutrient as the largest potash producer in the U.S. and the third-largest in the world after Uralkali and Belaruskali.

I have my reservations, though, about investing in PotashCorp just yet. The reason: its impending merger with Agrium. To be fair, there are a lot of things to like about the merger. It will create the world's largest nutrient company called Nutrien and give PotashCorp access to Agrium's lucrative and resilient retail farm business that sells seeds and crop protection products. Investors can also expect a special dividend or share repurchases as PotashCorp is about to pocket nearly $5 billion from the sale of its minority investments, especially Sociedad Quimica y Minera (SQM -2.06%), as part of the merger regulatory requirements.

However, having to sell SQM at a time when lithium is soaring on the back of rising demand for electric-vehicle batteries means PotashCorp is about to lose a solid investment that could have earned handsome returns and dilutes some of the merger's advantages to PotashCorp. I'd keep PotashCorp and Agrium stocks on the radar, but bet only after I've waited at least a quarter or two after the merger to see that the companies are integrating smoothly and are on track to generate $500 million in synergies as they've forecast.

Instead, you could look at Mosaic right now, which is among the five largest manufacturers of potash and the largest combined manufacturer of potash and phosphate in the world. Mosaic is doing a lot of things right in both its potash and phosphate business.

A chart showing Mosaic's position in the global potash and phosphate market against competitors.

Mosaic looks attractive as a potash bet thanks to its strong foothold in the industry. Image source: Mosaic.

On the potash side, Mosaic's potash mine is expected to start production in the middle of next year. K3 will not only eliminate annual brine costs worth $150 million but is expected to be one of the lowest-cost potash mines in the world in the long run.

As for phosphates, sales from Mosaic's high-margin, patented four-fertilizer granule MicroEssentials are rising steadily and expected to make up 33% of Mosaic's total phosphate mix by 2021. While that should boost Mosaic's margins, its recent buyout of Vale's fertilizer business in Brazil has expanded the company's footprint substantially in a key fertilizer market.

By the end of 2020, Mosaic expects to generate $1 billion in cumulative cash flow and is targeting a fixed annual dividend of $0.10 per share. It's worth noting that Mosaic slashed its dividends sharply in the past year, but I don't foresee further cuts. Mosaic is controlling costs, has a comfortable debt-to-equity ratio of 36%, and has been free-cash-flow positive throughout the downturn. With the stock now trading at a price-to-book value of only 0.8, which is less than half that of PotashCorp's, and only 9.7 times cash flow compared with PotashCorp's P/CF of 13, Mosaic looks like a great potash bet today.

The potash stock to avoid: Intrepid Potash

Unlike the strong stories for Mosaic, or even Nutrien, Intrepid Potash looks like a lost cause. Mind you, the stock has nearly tripled in just a year and a half, but it's trading at a fraction, or only about 20%, of its 2012 prices. More importantly, that recovery in its share price wasn't backed by improving potash fundamentals. On the contrary, investors have been pinning hopes on Intrepid's diversification away from potash to salt, magnesium chloride, and byproducts like water. Yes, you read that right: water.

Intrepid Potash found itself in a muddle after potash prices tanked. Unable to make money amid lower potash sales and higher costs, Intrepid breached debt covenants early last year. The company's auditor only made things worse by raising concerns about whether Intrepid can survive at all. A market downturn and a liquidity crunch proved lethal.

A caution tape.

Investors in Intrepid Potash should exercise caution. Image source: Getty Images.

Intrepid Potash's management has, fortunately, been able to avoid bankruptcy so far. In the past one year, the purely domestic sales-focused potash producer has also reduced its debt by a substantial margin and lowered its production costs. While the latter can be credited to the use of solar evaporation techniques to produce potash from brine, Intrepid has resorted to rapid share issues -- and hence dilution of shareholder wealth -- to pare down debt. That's a yellow flag in my investing books, and I see no reason whatsoever why investors in potash should risk putting money on Intrepid Potash.