AGU

POT (AGU)

Hamilton

We have not commented much on POT, other than to say that it is a rather high Beta-stock and very sensitive to China’s wellbeing. However, we did recommend selling AGU at about $72, after which it dropped to about $52. After that both stocks went off the radar screen and now that 3/4 of a year has gone by we have this bid for POT; so, if you happen to own it the question now is how high can it go? By the way AGU has not yet returned to the $72 price level! Here is the POT chart. (looks a lot like MFC !)

POT aug 2010

It is worth remembering that this stock was at $246 in 2008 and then dropped to $61, or about 74%. The subsequent rebound, after a swift move up, has been anemic for the last year and a half and it took the 40 billion offer to get prices  to $152 or $22 above the bid. So,using EW what is a logical value? $154 is a 50% and $175 a 62% retracement, chances are the stock will trade within that range, probable at the lower end where C=A. A 4th and 5th wave are still needed to complete the pattern (the gap having occurred in the 3d wave of C.

Theoretically, using a discount rate of 0% and assuming that Malthus was right after all, albeit off by a mere 210 years and invoking the famous ceteris paribus by assuming the mathematical impossibility that China will continue to grow at 10% forever, the stock is worth an infinite amount, which is what the market seems to be banking on. The rumor is that another suitor is lurking in the bush even though it is not readily apparent who that might be as there are few companies that have the clout to take so much hay on their fork (China itself , maybe??). Buy on rumor and sell on fact,  at $160 +

AGU again, Feb 8 2010.

Hamilton

Just a quick update on Agrium. The stock reported much better earnings than they “guided” a few months ago and in the euphoria of the moment the stock is up nicely. Here is the chart;

AGU Feb 8 2010

Up a few dollars so far on the day. Here is the rub; the reported earnings of 53 cents a share was down from 79 cents last year but that was an unusual year. Conveniently losses due to hedges on natural gas would have reduced the above profit by 17 cents a share. By the same logic the stock-based compensation also reduced earnings by 17 cents a share. Both of this miraculously are considered one time items – go figure are not hedges part of your operations and compensation? –this is like the consumer price index without food and energy! Anyway you treat these items as operational you have an income for the quarter of 53 – 17 – 17 = 19 cents for the quarter or 24% of last years. This time they guided more positively, maybe that accounts for the temporary rise in the stock.

AGU, Feb 2010

Hamilton

AGU and also POT and MOS with it have continued to drop and at least as far as Agrium is concerned the outlook does not look good. The stock dropped below the $61 level and this is a sure fire indication that the a-b-c perfectly symmetrical correction is over. The overlap with previous high points argues that the stock will go further down, most likely to new lows. See previous comments.

AGU Feb 2010

Mosaic has already overlapped and was not able to retrace to the 50%+ level at all and therefore looks even more fragile. Potash (not shown) is somewhere in between but also a sell.

MOS feb 2010

AGU Agrium,Jan. 21 ,2010 (also POT, MOS etc.)

Hamilton

AGU Jan21, 2010

AGU Jan 21, 2010 2

Agrium has, like Potash and Mosaic, performed outrageously well the last 5 years or so only to go into a very steep dive last year. At this point we do not know if the $115 high 0r the $30 low represents the “true” value if there is such a thing. What we do know is that a hell of a lot of Chinese people were fed more than 5 years ago and are fed today, so I am agnostic about the China factor. Also we know that the stock has rebound to the 50% level, the lower end of the normal range of 50 to 62%. What is also fairly clear at this moment is that the rebound was a very symmetric A-B-C, which though it may yet change, is a dead give away to step aside. A trade below $61 would initially confirm this outlook but rather than using a stop=loss I would simple sell allthree.