Readers of this space know that the preferred tack is to look for well-capitalized companies with competitive advantages in sectors with secular, long-term growth trends. One select sector has been oil/oil services, and another right near the top has been fertilizer producers, primarily Potash, Mosaic, and Agrium, first reviewed in December 2007-January 2008.
To be sure, the sector has been bid-up, as a wider community discovers the value of fertilizer and companion products amid the likely substantial increase in global food demand in the decade ahead.
Too late to get in on a fertilizer play? Hardly. P/Es are higher, so entry point is key, but with the above in mind, here's a revised review of the fertilizer producers, with the updated Sell/Stop Loss levels. They're ranked by risk, with the top stock, POT, being the lowest risk.
TheStreet.com's Jim Cramer says the bull story here has more causes than just a weak greenback.
Better seeds and more fertilizer. That's it. Those are the technology weapons in the war against food shortages caused in the short term by a worldwide obsession with biofuels (we are the worst offender, of course) and in the long term by the increased affluence in China and India, which leads to more nutritious, protein-filled diets.
Both forces, when combined with worldwide droughts and failed harvests, not augmented by the U.S. -- we are late to start with our corn season -- are driving prices up to ridiculous levels. I have no doubt that if tomorrow the president of the United States said he was suspending the biofuel mandates for ethanol that we would see a collapse in food pricing. But I also have no doubt that this inept administration could never figure that out.
So, the solution comes to all of the stocks that were crushed yesterday: Monsanto (NYSE: MON) (Cramer's Take), Potash (NYSE: POT) (Cramer's Take), Mosaic (NYSE: MOS) (Cramer's Take) and Agrium (NYSE: AGU) (Cramer's Take). Without better seeds that produce higher yields, without more fertilizer that increases yields, we are going to be facing a long-term continuation of these price increases and the attendant inflation and food riots. Inflation, by the way, that has nothing to do with the Fed, unless the Fed is also a big granary hoarding wheat and corn.
Today's good news really came from issues outside of economic numbers. Many are starting to think the end of the rate cut cycle is near because of inflation concerns, and even oil saw a nice drop of over $2.00 per barrel today. The Labor Department showed weekly jobless claims for unemployment benefits declined by 33,000 last week to 342,000, and that was slightly better than expectations. The Commerce Department gave really bad news though, as new home sales fell by 8.5% in March to an annual rate of 526,000 houses, the worst in more than fifteen years. Median home prices slid more than in almost 40 years. Below are the unofficial closing levels:
Apple, Inc. (NASDAQ: AAPL) managed to climb up after opening soft as many noted there wasn't much sizzle to its guidance the stock after it blew past earnings yesterday. That didn't last and shares rose by more than 4% to $169.60 in the last minutes of the day.
MOST NOTEWORTHY: Abercrombie & Fitch, ENGlobal Corp and Wausau Paper were today's noteworthy initiations:
Morgan Keegan initiated Abercrombie & Fitch (NYSE:ANF) with a Market Perform citing lack of comp momentum and the outlook for consumer spending.
Jesup & Lamont expects ENGlobal's (NASDAQ:ENG) earnings momentum to remain in place due to sustained demand for energy products. Shares were initiated with a Buy rating and $13.25 target.
Soleil expects Wausau Paper (NASDAQ:WPP) shares to be driven by its value-added market focus, product innovation and improved mix. Shares were assumed with a Buy rating.
OTHER INITIATIONS:
Citigroup assumed coverage of XM Satellite Radio (NASDAQ:XMSR) with a Hold rating from Buy, and a $12.25 target from $17. The firm also assumed Sirius Satellite (NASDAQ:SIRI) with a Buy rating and $8 target from $4.25.
Morgan Stanley initiated MarkWest Energy (NYSE:MWE) with an Overweight rating.
Soleil initiated Potash (NYSE:POT) with a Hold rating.
So far this year, it's been a tough IPO market. However, there were no problems for the offering of Intrepid Potash (NYSE: IPI), which sold 30 million shares at $32 a piece. In today's trading, the shares are up an impressive 56%.
Intrepid Potash is the largest producer of muriate of potash in the U.S. It operates production facilities, three in Mexico and two in Utah.
According to Fertecon Limited, the global potash market is expected to grow 3.5% per year from 2007 to 2011. Simply put, there is strong demand from China, India and other emerging economies. In fact, as personal incomes grow, there tends to be an increase in consumption of animal protein, which requires significant amounts of grain for feed.
As for Intrepid Potash, the firm is ramping up nicely. Last year, revenues spiked 40% to $213 million and earnings came to $29.7 million.
Recently, I had the opportunity to speak with Robert Reich about some of the problems facing our economy and humanity. Those are two very big topics that could easily fill days of talk-time and we managed to scratch through it in 20 minutes or so.
Professor Reich is a wise gent who brings us closer to understanding what is needed in an ailing economy that has seen its share of economic disasters. What is needed is a good old belt tightening, it seems, and significant change in the mindset of Americans. It seems that since China and India are consuming everything in sight, it is up to us to make sue that there is going to be enough food and drink for our future generations.
The markets were able to shake everything off today after techs and financials delivered more hope than economics could deliver in fear. Housing construction gave levels not seen in more than 15-years and the Fed's Beige Book showed that the economy deteriorated further with weak spending, uncertainty, housing and credit woes. Even $115/barrel oil today didn't spook those hoping for a recovery. Even multi-year inflation in China and Europe didn't spook investors. Below are today's unofficial closing levels for US index averages:
This market is tough. Pros and novices alike are having a tough time. Particularly in a down market, a market commentators like to call a ""stock picker's market," I find it illustrative to dig deeper into the holdings of those special professional money managers that have found a way to make a go of it.
Take the CGM Focus (CGMFX) fund. This fund consistently shows up at the top of 1-year, 3-year, and multi-year best performers. CGM Focus has returned on average 37% per year for the past five years. While this is absolutely no guarantee that it will continue to perform like this, fund manager Chuck Heebner seems to have the special sauce -- at least for now.
So, what has been so successful for the fund?
Commodity picks like fertilizer plays Potash (NYSE: POT) and Mosaic (NYSE: MOS) have been big positions and have been big winners. Steel plays like US Steel (NYSE: X) have performed very nicely for CGM as well.
Looking at what worked is somewhat like looking into a rear-view mirror. These gains were in the past. What's Heebner and team buying now?
TheStreet.com's Jim Cramer says that until we have some clarity on the way out, we'll have a tough road ahead.
This is a confusing moment, for the same reason as always -- the darned mortgage market. Dueling plans seem destined to go nowhere while defaults continue to go up. We need something to stabilize the house price depreciation and someone to take the hit: FHA, Fannie Mae (NYSE: FNM) (Cramer's Take), Freddie Mac (NYSE: FRE) (Cramer's Take)? I don't care.
The president's plan sounds like it tries to address who should take the hit -- a little bit bank, a little bit government -- but it is piecemeal, as is everything that has been done about this issue.
I am and have been banking on an expanded FHA plan that would put the onus on that organization to do long, low-interest-rate loan guarantees. It is a simple plan, and I bet the government would make money from it. It would end the madness of trying to figure out how to deal with each one of these stopgappers.
In this April 1st article, I wasn't kidding around when I chose less popular stocks over hotly debated names like Google (NASDAQ: GOOG), Apple Inc (NASDAQ: AAPL) and Lehman Brothers Holdings (NYSE: LEH). Because investing is not blogging-the amount of hits, traffic and debate a topic stirs up does not help you make money (in fact it might hinder it considering all the cheerleaders are already invested).
Instead, as I often say in posts like this and as I yell to random passers-by on the streets of NYC (for fun), "it's all about the charts, stupid!"
Now, one week later from that article, ask me if I am surprised to see 2 out of the 3 stocks from last week's article-Weatherford International (NYSE: WFT) and United States Steel Corporation (NYSE: X) continuing to breaking out to new highs, with Illumina Inc (NASDAQ: ILMN) "struggling" up only 4% on the week, a few cents off its highs.
After hitting a one-year low of $54.93 last March, the stock has hit a new one-year high today. POT opened this morning at $173.01. So far today the stock has hit a low of $171.11 and a high of $175.46. As of 12:20, POT is trading at $173.90, up $6.23 (3.7%). The chart for POT bullish but deteriorating.
For a bullish hedged play on this stock, I would consider a May bull-put credit spread below the $130 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 6.4% return in just six weeks as long as POT is above $130 at May expiration. POT would have to fall by more than 25% before we would start to lose money. Learn more about this type of trade here.
POT hasn't been below $130 since January and has shown support around $154 recently. This trade could be risky if the company's earnings (due out on 4/24) disappoint, but even if that happens, that position could be protected by support the stock might find around $150 from it's 50-day moving average.
DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in POT or MOS.
I primarily trade fun smallcap stocks, so until the past few days, I hadn't either. But when I began researching, I just kept finding more and more interesting ETFs -- it was addictive! Almost addictive as my new Twitter account where I've discovered I can chat with business legends, yesterday it was the founder of eBay Inc (Nasdaq: EBAY). Okay, maybe ETFs will never be that addictive!
Out the few hundred ETFs I looked into, here were some of the more interesting of the bunch:
All it takes is some news to make you realize the risk involved in smallcap investing. That news came in the form of a horrific earnings report last night from Origin Agritech (NASDAQ: SEED), showing revenues and margins decreasing along with guidance that was more than 50% below the estimates of the one analyst that covers the company.
I often advise against trusting any company whatsoever, but it's rare that one lets investors down so greatly. I had no position in the stock, but along with Converted Organics (NASDAQ: COIN) and Titan Machinery (NASDAQ: TITN), I profiled Origin back in January as an up and coming agriculture stock. Since then, two of those three stocks have broken out to new highs in a similar fashion to this hot sector's leaders like Potash Corp. of Saskatchewan (NYSE: POT), Mosaic (NYSE: MOS), Monsanto (NYSE: MON) and Agrium Inc. (NYSE: AGU).
Performance aside, those billion dollar behemoths are established companies, with global investors and brands, while these new kids on the block are the exact opposite. Plagued by having few products, fund raising problems and debt issues, this 50% shortfall exemplifies just one of the many issues with which small-cap companies struggle. I mean they are really fighting for lives! And that's why they are priced the way they are and derided by Wall Street.
MOST NOTEWORTHY: Potash, Cadbury Schweppes and Zoran were today's noteworthy upgrades:
Citigroup upgraded shares of Potash (NYSE: POT) to Buy from Hold and raised its target to $178 from $141 to reflect their expectation for a more bullish outcome from the ongoing China Potash contract negotiations.
Cadbury Schweppes (NYSE: CSG) was raised to Overweight from Neutral at JP Morgan to reflect the company's takeout potential and cash returns.
Oppenheimer raised its rating on Zoran (NASDAQ: ZRAN) to Outperform from Perform on valuation, as they believe the recent weakness is overdone.
OTHER UPGRADES:
Pep Boys (NYSE: PBY) was upgraded to Market Weight from Underweight at Thomas Weisel.
JMP Securities upgraded Actuate (NASDAQ: ACTU) to Strong Buy from Outperform.
Goldman raised Broadcom (NASDAQ: BRCM) to Buy from Neutral.
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MOST NOTEWORTHY: Intevac, PrivateBancorp and Potash were today's noteworthy downgrades:
TheStreet.com's Jim Cramer says the bull story here has more causes than just a weak greenback. 
So far this year, it's been a tough IPO market. However, there were no problems for the offering of Intrepid Potash (NYSE: IPI), which sold 30 million shares at $32 a piece. In today's trading, the shares are up an impressive 56%.
In this April 1st article, I wasn't kidding around when I chose less popular stocks over hotly debated names like Google (NASDAQ: GOOG), Apple Inc (NASDAQ: AAPL) and Lehman Brothers Holdings (NYSE: LEH). Because investing is not blogging-the amount of hits, traffic and debate a topic stirs up does not help you make money (in fact it might hinder it considering all the cheerleaders are already invested). 
Potash Corp. of Saskatchewan, Inc. (NYSE: POT) shares are soaring today after competitor Mosaic Co. (NYSE: MOS) reported a third-quarter adjusted profit of 99 cents per share, beating analysts' expectations of 95 cents per share. MOS benefited from a global boom in the agricultural sector, which should certainly also be good news for POT. If you think that the stock won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on POT.
If you've ever delved into investing in ETFs (exchange-traded funds, basically entire indexes and sectors that trade like stocks), you're already familiar with the most popular, those being Powershares QQQ Trust (Nasdaq: QQQQ), SPDR Trust Series 1 (AMEX: SPY), Diamonds Trust, Series 1 (AMEX: DIA), iShares Russell 2000 Index (NYSE: IWM) and lately Financial Select SPDR (AMEX: XLF) and UltraShort QQQ ProShares (AMEX: QID). But have you ever looked into those that are much less followed, but more capable of yielding some big-time returns?
All it takes is some news to make you realize the risk involved in smallcap investing. That news came in the form of a horrific earnings report last night from Origin Agritech (NASDAQ: SEED), showing revenues and margins decreasing along with guidance that was more than 50% below the estimates of the one analyst that covers the company..gif){kind=logo}
MOST NOTEWORTHY: Potash, Cadbury Schweppes and Zoran were today's noteworthy upgrades: 
Just how high will U.S. gasoline prices rise?
Nordstrom and Kohl's post smaller-than-expected Q1 profit declines
Oil hits record $127.43 on supply concerns, raised Goldman forecast
