can anybody tell me whats going on with POT, im lossing my ass with that stock 
regarding aLL AGS.....
Fertilizer Stocks Look Ripe For Correction
Last update: 4/29/2008 11:49:51 AM
By Rob Curran
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--Growth this fast just isn't natural.
Momentum traders appear to have artificially inflated stocks in the fertilizer business recently, creating what looks like a miniature version of the speculative technology bubble.
For weeks, shares of fertilizer makers like Potash of Saskatchewan Inc. (POT), Agrium Inc. (AGU), Mosaic Co. (MOS), CF Industries Holdings Inc. (CF) and Sociedad Quimica y Minera de Chile SA (SQM) rose day in and day out - both when reports of higher fertilizer prices surfaced and when they didn't. In the last 12 months, Mosaic has almost quadrupled in price, Potash and CF Industries have roughly tripled, and Chile's SQM has nearly doubled.
The stocks had their biggest dip in months last Thursday even after Potash raised its 2008 profit projection by more than one third. Recent buyers appear to be hedge funds and other momentum traders - fickle investors by definition - increasing the concern that corrections on Thursday and early this week may be just the prelude to a sharper drop.
"The stocks in the fertilizer group are somewhat dislocated from the fundamentals, but it's hard to game it," said Christopher Altschul, chief investment officer for hedge fund manager Highlander Fund Management.
Altschul's fund counted Chile's SQM as its largest holding on Dec. 31, but has since sold its entire stake. When the stock blew through Altschul's target price, he effectively rated it and the other fertilizer stocks "avoid."
"It was hard to watch this month and know that you're not there, but (Thursday) I was relieved. I would have had a bit of a tantrum seeing the performance on the earnings side and then the stock performance," Altschul said.
Unquestionably, the fertilizer business is growing fast and may well continue to do so. Prices of many foodstuffs are moving upward as biofuel is eating up supply and inflation is spreading from oil and other commodities. That has allowed makers of the specialty chemicals to demand higher prices amid limited production capacity.
High Barrier Of Entry
Of the three principal types of fertilizer, two are based on minerals - phosphate and potash, making entry into the business almost impossible for companies without reserves of these materials. Potash, a potassium compound, is particularly scarce, and is mined in only a handful of countries worldwide, notably Canada. In April, Chinese company Sinofert Holdings Ltd. (0297.HK) agreed to pay a group of producers active in Canada, including Potash Corp. of Saskatchewan, Mosaic, and Agrium, more than triple last year's price for potash - $576 a ton, compared with $176 a ton a year earlier. For fertilizers based on ammonia or nitrogen, however, the raw material is natural gas, and the recent spike in that commodity could hurt costs in that business.
Though their specialties vary, Potash of Saskatchewan, Mosaic, SQM and Agrium all do business in each of the three categories of fertilizer. While profit growth for these companies is currently robust, their profits have ebbed and flowed in the past with the price of the chemicals they sell. Potash of Saskatchewan expects its earnings to triple in 2008 to between $9.50 and $10.50 a share from $3.40 a share in 2007. There's always the risk that profit growth will slow, or start to decline, as occurred between 1999 and 2003. Yet the stocks are trading at valuations that anticipate profit growth will last indefinitely.
For example, SQM, the Chilean fertilizer maker, closed Monday with a valuation of 37.8 times expected 2008 profit and 33 times expected 2009 profit, compared with 30 times and 24 times for Google. Unlike the fertilizer stocks, the great expectations for Google's growth are not based on volatile chemical prices.
Charts Like Tech Companies
Five-year charts of Potash, SQM, and Mosaic closely resemble those of fast-growing tech companies like Intel Corp. (INTC) and Microsoft Corp. (MSFT) in the run-up to the dot.com bust of 2000 to 2001: a steady upward slope, followed by several months of increasingly steep gradient. It took Potash from early 2003 until the end of 2006 to go from $10 to $48, and only another year for it to reach $144. Since the start of 2008, the stock has surged from there to peak at $216 on April 23.
"From my point of view, Potash is vulnerable," said Carter Worth, chief market technician at Oppenheimer & Co. "A stock that trades on a 45-degree angle can keep going up forever, but once that angle changes...it's extended. It happened to Apple, it happened to Croc's.
Now you're getting into that situation wiath Potash, and the presumption is a setback is imminent."
With that in mind, Worth recommended a short bet on Potash, in anticipation of a fall.
The April 22 debut of Intrepid Potash Inc. (IPI) was another echo of the dot.com boom - the breathless clamor among investors to get in on the ground floor of an initial public offering. Intrepid, the largest U.S. potash producer, rose more than 57% on the first day of trading after the shares priced above the expected range.
It's notoriously difficult to time the end of a speculative run-up precisely because the reversal is usually so sudden and swift.
"It's like someone cried 'fire!' in a crowded theater," said Tobias Levkovich, the U.S. equity strategist at Citigroup who has compared the action in commodity stocks to dot.coms and home builders in times past. "It's difficult to get out of the way, and people can get trampled."
At least one market participant expects a sharp correction to come sooner rather than later, however.
Lorenzo Di Mattia, manager of hedge fund Sibilla Global Fund, said a pattern in Thursday and Monday's trading could return with a vengeance in the next few weeks. On Thursday, the dollar abruptly strengthened against the euro on sentiment that the European Central Bank could cut rates more aggressively than the Federal Reserve. As the dollar spiked, the price of oil slipped and traders ditched commodity shares of all description - including those of fertilizer makers.
"These are the ingredients that usually appear before a reversal, which I expect in the next several weeks.... commodities down, dollar up," Di Mattia said.
-By Rob Curran, Dow Jones Newswires; 201-938-5176;
robert.curran@dowjones.com
(END) Dow Jones Newswires
April 29, 2008 11:49 ET (15:49 GMT)
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