A sputtering economy, implosions at financial institutions, or just plain bad management -- on any given day, investors can name a number of reasons to sell a stock. Yet while panic never benefits investors, it's still good practice to play devil's advocate with investments from time to time.
In Motley Fool CAPS, more than 130,000 members have weighed in on more than 5,300 stocks, sharing bullish and bearish opinions alike.
In the case of fertilizer producer PotashCorp (NYSE:POT), a total of 4,546 members have weighed in on its chances of success. I've already plucked out some of the bullish rationale backing PotashCorp today, so here are three counterpoints to consider, courtesy of CAPS:
1. Oversupply
Mosaic (NYSE:MOS), Terra Industries (NYSE:TRA), and Agrium (NYSE:AGU) have already slashed production in other fertilizer product groups in response to a saturated supply chain. Recent data from the Fertilizer Institute shows potash inventories at North American producers are 42% higher than the previous five-year average, prompting PotashCorp to further cut its supply by 1.5 million tons.
2. Potash price pressure
Potential longer-term lower potash prices prompted Soleil Securities to downgrade PotashCorp. The company had been holding the line on prices, but a recent 25% price reduction between Belarusian Potash and Brazilian buyers could have a negative effect on PotashCorp's future bargaining power, making it tougher to keep margins steady on its prime mineral.
3. Weak farmer sentiment
The U.S. Department of Agriculture predicts farm income to decline 9% this year as farmers look to plant cheaper crops like soybeans, which require less fertilizer and farming equipment, to help offset the hit from lower commodity prices. This could affect the top lines across the board of companies involved in agriculture, including Monsanto (NYSE:MON), Deere (NYSE:DE), CNH Global, or even Terex (NYSE:TEX).
Of course, Potash has survived and thrived despite dozens of obstacles in the past. Will the company continue its success? When weighing questions such as this, CAPS makes a great resource to augment your own analysis.
To see what the very best CAPS members are saying now about PotashCorp, just click on over to Motley Fool CAPS and have a look -- it's all free, and your opinion's always welcome.
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