I didn't go with Barron's full headline "Fertilizer Stocks to Buy Now" because I don't have a feel for the timing.
I've only used the "Now" formulation once, in last month's "First Solar: Trading the Dec. 14 Investors and Analysts Guidance Call--Buy it NOW (FSLR)" which resulted in a 17 day triple in the options.
We'll see if Gleacher & Co. has their timing down.
From Barron's Investors' Soapbox:
Gleacher & Co.
Recent fertilizer stock performance has been lackluster due primarily to a lull in news flow and demand activity with the onset of cold weather marking the end of fall fertilizer application.
However, despite the seasonal softness in nitrogen and phosphate prices, underlying fundamentals remain quite robust. Strong grain prices will incentivize farmers to maximize fertilizer application and yield in the spring. With China raising the export tariffs on urea and phosphates ahead of schedule in order to keep products at home, we expect the pricing momentum to resume by January as the market begins to gear up for spring planting.
In our view, the continuing rebound in global fertilizer demand and solid grain prices will continue to support strong fertilizer fundamentals.
We believe investors should view the recent pullback as a buying opportunity in our Buy-rated names -- CF Industries Holdings (ticker: CF), Mosaic (MOS) and Agrium (AGU) -- as we see upside of 28%, 22% and 17%, respectively, from current levels .
We believe the valuations of Potash Corp. of Saskatchewan (POT) and Intrepid Potash (IPI) [both rated at Neutral] already reflect the strong potash fundamentals.
North American November producers' inventory levels increased by 182,000 tons (up 14%) versus October. The increase is primarily due to seasonality following the completion of fall application.
November inventories have increased in four of the last five years (the exception was in 2009). Global demand has picked up considerably and producers have implemented price increases.
Despite the modest increase in November, producers' inventories remain tight and should bode well for the upcoming negotiations with China for the 2011 contract.
Global producers are eyeing a price increase of $50 per metric ton (the 2010 contract was for $350 per metric ton) and that compares to current spot prices (for first-quarter deliveries) of $440 per metric ton in Southeast Asia and $415 per metric ton in Brazil. Ending November potash inventories of roughly 1.6 million metric tons are 50% below last year's levels and are now 22% below the previous five-year average (last month they were 24% below the five-year average).
-- Edlain Rodriguez
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