According To Commodities Money Management Expert
67 WALL STREET, New York - November 18, 2009 - The Wall Street Transcript has just published its TWST Small Cap Value Report offering a timely review of the sector to serious investors and industry executives. This 55 page feature contains expert industry commentary through in-depth interviews with highly experienced Money Managers
Topics covered: Small-Cap Value - Capital Preservation - Sovereign Bonds - Precious Metals - Value-Investing - Companies with International Exposure - US-listed Chinese Companies - Risk Limitation - Industry-Diversified Portfolios - Long-Term Value - Micro-Cap Companies - Turnaround Situations - Strategic Buying - Fundamental Analysis
Companies include: Bridgepoint Education (BPI); Compass Minerals (CMP); Flexsteel (FLXS); General Electric (GE); Gold Miners ETF (GDX); Hardinge Corp (HDNG); Northgate Minerals (NXG); Phillips-Van Heusen (PVH); Potash (POT); Adobe (ADB); Affiliated Computer Services (ACS); Agrium (AGU); Alliance Data Systems (ADS); American Society of Civil Engineers (ASCE); American Water Works (AWK); Atlantic Tele-Network (ATNI); BHP Billiton (BHP); Celanese Chemical (CE); CenturyTel (CTL); Cisco (CSCO); Clean Energy Fuels (CLNE); Consolidated Graphics (CGX); Dell (DELL); Dell Inc. (DEL); Dillard's Department Stores (DDS); Drew Industries (DW); Educational Development Corporation (EDUC); First Acceptance Corp (FAC); Forestar Group (FOR); Freeport-McMoRan Copper & Gold Inc (FCX); Fresh Del Monte (FDP); Goldcorp (GG); Hain Celestial (HAIN); Harbin Electric (HRBN); Huron Consulting (HURN); IBM (IBM); IMAX (IMAX); IMS Health (RX); Intel (INTC); John Deere (DEE); Kennametal (KMT); Kraft Foods (KFT); Lamar Advertising (LAMR); Microsoft (MSFT); Minefinders (MFN); Monsanto (MON); Mosaic (MOS); NBTY (NTY); Nature's Sunshine Products (NATR); Newmont Mining (NEM); Nobility Homes (NOBH); Omniture, Inc. (OMTR); Perot Systems (PER); Pfizer (PFE); Puplava Financial Services, Inc. (PFS); Puplava Securities, Inc. (PSI); SPDR Barclays Capital International Treasury Bond Fund (BWX); SPDR Gold Trust (GLD); Silver Wheaton (SLW); Syngenta (SYT); Tellabs (TLAB); Temple-Inland (TIN); Tempur-Pedic (TPX); Tesoro (TSO); Valero (VLO); Verizon Wireless (VZ); Whole Foods (WFMI); Xerox (XRX); Yamana (AUY).
In the following brief excerpt from just one of the in depth interviews in the Special Report, a top tier money manager discusses the outlook for the market for investors.
James J. Puplava has been President and CEO of Puplava Financial Services, Inc. (PFS) since 1985. For 12 years, he held a position as Branch Manager for LPL Financial Services, LLC. In 1996, he incorporated the broker/dealer firm, Puplava Securities, Inc. (PSI) and is its President. He also serves on the Board of Directors for Kimber Resources, Inc. of Vancouver, British Columbia,Canada. He graduated cum laude in History and Economics from Arizona State University. He then went on to graduate summa cum laude with a Master's Degree in finance and Accounting from the American Graduate School of International Management (Thunderbird).
TWST: What are some of these opportunities that you have found over the last few months and what are the reasons why you found the companies attractive?
Mr. Puplava: Let's just take the agricultural space. As I mentioned earlier, there's a trend-and it's global-of an ongoing decline in the amount of arable land per person. This ratio peaked in 1970, and by 1980, there was less arable land per person than in 1970; the same thing happened in 1990 vs. 1980, and 2000 vs. 1990. 2010 vs. 2000 is predicted to continue the trend. So there are only two ways to increase agricultural output. One is to increase the amount of arable land devoted to crops; or two, to increase crop yield. So seed companies like Monsanto and Syngenta which provide seeds and products that can increase crop yield, or fertilizer companies like Mosaic (MOS), Potash (POT), and Agrium (AGU) that also affect land arability and yield, or companies like John Deere (DE) that help large farms' automation to increase output per field acre of planted crops are attractive.
We think the agricultural space is very undervalued right now and I don't think the market is paying a lot of attention to it right now. Even though some of the companies in this sector are up, they have not participated to the same extent that you've seen in other sectors. So, we still like agriculture. Another thing we think is that we are heading for a train wreck in the area of energy. Somewhere around the year 2011 or 2012, all of the recent cancellations of projects by major oil companies and national oil companies will start to cause another bottleneck in supply. We think the oil service sector will be one of the first sectors to benefit if that happens. If oil prices go up to $85 per barrel-and we think we could be looking at over $100 oil by the end of next year-the expansion of profit margins in the oil sector will be very promising. We believe that space offers an attractive opportunity for investors.
TWST: What about precious metals and gold? Gold of course has been going up and up as the dollar has been depreciating. What is your outlook there and have you found any companies to play that field?
Mr. Puplava: We still think we have a good possibility of hitting $1,250 or $1,300 gold in the next 12 months. In the gold sector, one of the opportunities we like is with mid-tier producers that are going to be able to increase their production over time. A company like Newmont Mining (NEM), whose production has peaked and who is having difficulty of replacing their reserves and increasing their production is still a fairly solid bet, but I think the outside performance is going to be in mid-tier producers who have the ability to increase their production.
A company like Minefinders (MFN), which went into production in the third quarter of last year, will be growing their production to close to 200,000 ounces-this is a company that is up 100% over the past year, although they did take a severe downturn in the sell-off last fall. Other companies like Northgate Minerals (NXG), which, even though one of their bigger mines will be going out of production by the end of next year, will be producing 400,000 ounces. They're also brining new mines on line. Yamana (AUY), which already producing a million ounces, will be increasing their production considerably over the next couple of years.
If I can draw the analogy to the bull market in technology in the 1990s, if you were in IBM (IBM), the big behemoth in the technology space, you made money, but the real money was made in Intel (INTC) Microsoft (MSFT) and Dell Inc. (DELL) or at Cisco (CSCO). These smaller companies that were able to grow their topline and also their bottom line over the decade were the real place to be; in a bull market you want to be in those companies that have the ability to grow their topline. In the mining space, that means either increasing production or reducing the cost of production. So, we like companies like a Minefinders, a Yamana, or a Northgate; and then in the larger-cap space, we like companies like a Goldcorp (GG), which is now a major producer, but is still a company that is going to be able to increase its production over the next 3 to 5 years. .. from the Wall Street transcript, JAMES J. PUPLAVA
Wednesday, November 18, 2009
Tuesday, November 17, 2009
Potash Gets a Soros-Led Boost
Shares of Potash Corp. of Saskatchewan (POT) hit a five-month high and led the Toronto Stock Exchange to higher ground Tuesday, after the hedge fund of billionaire investor George Soros increased its stake in the company by nearly 50%.
Soros Fund Management LLC purchased 970,368 shares of the world’s biggest fertilizer producer in the third quarter, bringing its total stake to 2.95 million shares, or 1% of the company, according to a report filed Monday with the U.S. Securities and Exchange Commission.
Potash Corp. shares jumped 6% to $115.81, making the company the biggest gainer among the S&P/TSX index. The benchmark rose 11.86 points to trade at 11613.12 late in Tuesday’s session.
Potash Corp.’s stock hit a 52-week high of $135 in the spring, off a low of $61.81 last December. Recent speculation that Australia’s BHP Billiton Ltd. could buy the company has helped lift the shares in the last month.
Soros Fund was the 19th largest shareholder as of Sept. 30. The biggest was Capital World Investors, a division of Capital Research & Management Co., which held 14.7 million shares, representing about 5% of the company.
Soros Fund Management LLC purchased 970,368 shares of the world’s biggest fertilizer producer in the third quarter, bringing its total stake to 2.95 million shares, or 1% of the company, according to a report filed Monday with the U.S. Securities and Exchange Commission.
Potash Corp. shares jumped 6% to $115.81, making the company the biggest gainer among the S&P/TSX index. The benchmark rose 11.86 points to trade at 11613.12 late in Tuesday’s session.
Potash Corp.’s stock hit a 52-week high of $135 in the spring, off a low of $61.81 last December. Recent speculation that Australia’s BHP Billiton Ltd. could buy the company has helped lift the shares in the last month.
Soros Fund was the 19th largest shareholder as of Sept. 30. The biggest was Capital World Investors, a division of Capital Research & Management Co., which held 14.7 million shares, representing about 5% of the company.
Cramer's take on AG
Cramer said that agriculture is the next sector that's ready to break out, after the Department of Agriculture raised its spot price forecast last week citing production shortfalls.
He said that seed giant Monsanto (MON Quote) confirmed the strength in the sector when it came out with positive news at its recent analysts meeting.
Cramer said Monsanto is the first "buy, buy, buy" in the group, now that the company can clearly see the light at the end of the tunnel for this long underperforming sector.
He also gave the nod to the fertilizer stocks of Potash (POT Quote), Agrium (AGU Quote) and Mosaic (MOS Quote). Cramer said that while Potash remains the cheapest in the group, his favorite remains Terra Nitrogen (TNH Quote) for its 6.4% dividend yield.
No agriculture rally would be complete without John Deere (DE Quote), said Cramer.
He said Deere no longer suffers from a strong dollar, and with 12 analysts rating the company a "hold," there's plenty of room for upgrades. Deere reports in just five days, and Cramer said he'd be a buyer of the stock ahead of any positive news the company is likely to report.
He said that seed giant Monsanto (MON Quote) confirmed the strength in the sector when it came out with positive news at its recent analysts meeting.
Cramer said Monsanto is the first "buy, buy, buy" in the group, now that the company can clearly see the light at the end of the tunnel for this long underperforming sector.
He also gave the nod to the fertilizer stocks of Potash (POT Quote), Agrium (AGU Quote) and Mosaic (MOS Quote). Cramer said that while Potash remains the cheapest in the group, his favorite remains Terra Nitrogen (TNH Quote) for its 6.4% dividend yield.
No agriculture rally would be complete without John Deere (DE Quote), said Cramer.
He said Deere no longer suffers from a strong dollar, and with 12 analysts rating the company a "hold," there's plenty of room for upgrades. Deere reports in just five days, and Cramer said he'd be a buyer of the stock ahead of any positive news the company is likely to report.
Cramer: Ag’s In Season Again
The rolling bull markets that Cramer described last week continue, this time agriculture taking the lead. It all started when the Department of Agriculture, also last week, raised its crop price forecast because of production shortfalls.
Monsanto [MON 77.33 2.30 (+3.07%) ], the genetically modified seed maker, immediately took off. The stock has climbed to $77 from $73, after management told analysts that it expects to double its gross profits by 2012. CEO Hugh Grant also said that there’s no longer any need to cut earnings estimates as a result of herbicide Roundup going generic. The higher crop prices will help to put a floor in those estimates as well.
Also key for Monsanto is the rally in corn prices, which climbed 21% to $3.73 in October. December futures now trade at $4.27. The company makes the best genetically engineered corn seed, Cramer said, the commodity’s lading value has hurt Monsanto. But now it has the chance to catch, and that’s another reason Cramer recommended the stock.
Rising crop prices mean that farmers will want to produce more to take advantage. That’s where the fertilizers come into play. Cramer’s favorites? Potash [POT 110.60 6.42 (+6.16%) ] is the cheapest, he said, but he’s still partial to Terra Nitrogen’s [TNH 101.24 1.63 (+1.64%) ] 6.4% dividend yield.
And lastly, investors who want to play ag should buy Deere [DE 49.15 0.24 (+0.49%) ]. This stock may be flirting with its 52-week high, but DE is up just 28% for the year. That’s still down 48% from 20 months ago, Cramer said. Admittedly, Deere has had a habit of underperformance, but the Mad Money host is expecting an analyst change-of-heart. An upgrade from the 12 holds and one sell should send the share price higher.
How does he know the analysts will turn bullish? Because their outlook is too bearish for the premier ag manufacturer, Cramer said, which has a great overseas business that should be helped by the weaker dollar. Plus, he thinks the company during its Nov. 25 earnings report will tell investors that its construction and forestry division has finally bottomed.
Ag’s turn to carry the market has just started, Cramer pointed out, and these rolling bull markets have lasted for at least three months. So investors can “load up on a Monsanto or a TNH,” he said, or buy Deere ahead of its quarter.
Monsanto [MON 77.33 2.30 (+3.07%) ], the genetically modified seed maker, immediately took off. The stock has climbed to $77 from $73, after management told analysts that it expects to double its gross profits by 2012. CEO Hugh Grant also said that there’s no longer any need to cut earnings estimates as a result of herbicide Roundup going generic. The higher crop prices will help to put a floor in those estimates as well.
Also key for Monsanto is the rally in corn prices, which climbed 21% to $3.73 in October. December futures now trade at $4.27. The company makes the best genetically engineered corn seed, Cramer said, the commodity’s lading value has hurt Monsanto. But now it has the chance to catch, and that’s another reason Cramer recommended the stock.
Rising crop prices mean that farmers will want to produce more to take advantage. That’s where the fertilizers come into play. Cramer’s favorites? Potash [POT 110.60 6.42 (+6.16%) ] is the cheapest, he said, but he’s still partial to Terra Nitrogen’s [TNH 101.24 1.63 (+1.64%) ] 6.4% dividend yield.
And lastly, investors who want to play ag should buy Deere [DE 49.15 0.24 (+0.49%) ]. This stock may be flirting with its 52-week high, but DE is up just 28% for the year. That’s still down 48% from 20 months ago, Cramer said. Admittedly, Deere has had a habit of underperformance, but the Mad Money host is expecting an analyst change-of-heart. An upgrade from the 12 holds and one sell should send the share price higher.
How does he know the analysts will turn bullish? Because their outlook is too bearish for the premier ag manufacturer, Cramer said, which has a great overseas business that should be helped by the weaker dollar. Plus, he thinks the company during its Nov. 25 earnings report will tell investors that its construction and forestry division has finally bottomed.
Ag’s turn to carry the market has just started, Cramer pointed out, and these rolling bull markets have lasted for at least three months. So investors can “load up on a Monsanto or a TNH,” he said, or buy Deere ahead of its quarter.
Monday, November 16, 2009
Monsanto Confirms Guidance
At its investor conference call, Monsanto Company (NYSE: MON - News) indicated that it will accelerate launches for its Genuity SmartStax corn and Genuity Roundup Ready 2 Yield soybean products. The company emphasized its growth strategy from 2010 through 2012, which includes three operational imperatives: the conversion to Genuity SmartStax in U.S. corn, the upgradation to the Genuity Roundup Ready 2 Yield platform in U.S. soybeans, and increased penetration in Latin America.
Monsanto now anticipates its new Genuity SmartStax corn seed will launch on more than 4 million acres in 2010, compared to its previous expectation of 3 million to 4 million acres. As a part of the accelerated adoption of Genuity SmartStax, the company unveiled a new portfolio of product upgrades for key U.S. corn segments.
For the Genuity Roundup Ready 2 Yield platform in U.S. soybeans, Monsanto increased its launch-year expectation for 2010 to 8 - 10 million acres, compared to its previous projection of 7 - 8 million.
These launches, along with increased penetration in Latin America, are expected create opportunities for the company to meet its 2012 financial and commercial targets.
Monsanto is committed to doubling its gross profit by 2012 from 2007 levels. The company expects 2012 gross profit of $8.6 - $8.8 billion, including $7.3 - $7.5 billion from the Seeds and Genomics platform.
Monsanto reaffirmed fiscal year 2010 EPS guidance in the range of $3.10 - $3.30. Also, the company is confident of achieving its free cash flow target of $900 million to $1 billion for fiscal year 2010. The Zacks Consensus Earnings Estimate for fiscal 2010 is $3.27.
Monsanto now anticipates its new Genuity SmartStax corn seed will launch on more than 4 million acres in 2010, compared to its previous expectation of 3 million to 4 million acres. As a part of the accelerated adoption of Genuity SmartStax, the company unveiled a new portfolio of product upgrades for key U.S. corn segments.
For the Genuity Roundup Ready 2 Yield platform in U.S. soybeans, Monsanto increased its launch-year expectation for 2010 to 8 - 10 million acres, compared to its previous projection of 7 - 8 million.
These launches, along with increased penetration in Latin America, are expected create opportunities for the company to meet its 2012 financial and commercial targets.
Monsanto is committed to doubling its gross profit by 2012 from 2007 levels. The company expects 2012 gross profit of $8.6 - $8.8 billion, including $7.3 - $7.5 billion from the Seeds and Genomics platform.
Monsanto reaffirmed fiscal year 2010 EPS guidance in the range of $3.10 - $3.30. Also, the company is confident of achieving its free cash flow target of $900 million to $1 billion for fiscal year 2010. The Zacks Consensus Earnings Estimate for fiscal 2010 is $3.27.
Intrepid Potash: Investors Betting on a Fall
Bearish traders are betting that next spring won't be a bountiful one for fertilizer producer Intrepid Potash (IPI).
optionMONSTER's systems detected a large trade at the March 22 contracts, where 3,022puts changed hands in a clear buying pattern. All of the trading took place in a 10-minute span yesterday morning, with the puts going for $0.60 and $0.65.
The activity dwarfed the average volume of two puts a day at the strike for the last month and was 23 times the open interest of just 132 contracts, indicating that that buying represented newly opened positions. Overall puts at all IPI strikes outnumbered calls traded by about 6 to 1, a further bearish indication.
IPI fell 1.27% Tuesday to close at $25.58. For the puts purchased Tuesday to turn a profit, the stock would need to drop at least 16.5% by their March 19 expiration date.
Last month the stock had finally seemed to break out of a range between $22 and $29 that had been in place since mid-June, rising sharply in the first three weeks of October. But it fell when Credit Suisse initiated coverage of the shares with an "underperform" rating.
Then in its third-quarter earnings release last Thursday after the bell, the company reported that profits plummeted 81% as fertilizer sales slumped. That led to a downgrade Monday from RBC Capital to "sector perform" from "outperform."
optionMONSTER's systems detected a large trade at the March 22 contracts, where 3,022puts changed hands in a clear buying pattern. All of the trading took place in a 10-minute span yesterday morning, with the puts going for $0.60 and $0.65.
The activity dwarfed the average volume of two puts a day at the strike for the last month and was 23 times the open interest of just 132 contracts, indicating that that buying represented newly opened positions. Overall puts at all IPI strikes outnumbered calls traded by about 6 to 1, a further bearish indication.
IPI fell 1.27% Tuesday to close at $25.58. For the puts purchased Tuesday to turn a profit, the stock would need to drop at least 16.5% by their March 19 expiration date.
Last month the stock had finally seemed to break out of a range between $22 and $29 that had been in place since mid-June, rising sharply in the first three weeks of October. But it fell when Credit Suisse initiated coverage of the shares with an "underperform" rating.
Then in its third-quarter earnings release last Thursday after the bell, the company reported that profits plummeted 81% as fertilizer sales slumped. That led to a downgrade Monday from RBC Capital to "sector perform" from "outperform."
Potash: Will the Death of K+S Benefit the Sector?
Over the past few months, pricing for potash and other fertilizer products have been coming down. This is due not only to lack of demand, but because buyers are in the drivers seat and skillful at negotiation prices. The news about K+S appears to confirm the trends that we have seen with potash and fertilizer companies. Said another way… they are not doing so well.
As such, we have been shorting and covering Potash (POT) successfully between $101 and $85 recently.
According to Bloomberg reports:
K+S AG, Europe’s biggest potash producer, needs to sell shares as early as this year to bolster finances after a slump in demand for the crop nutrient almost wiped out profit, UniCredit analyst Jochen Schlachter said. A rights offer would help the company retain its credit rating level after tumbling orders weighed on third-quarter earnings, Schlachter said. K+S’s debut bond sale in September will give the company confidence it can convince equity investors to come forward with fresh funds, analysts said.
Yesterday morning Potash was down by about 2%. By mid-day it started a mysterious rise into the afternoon. Hearing the strength in Agriculture names is being attributed to positive intraday comments out from a boutique firm on POT, MOS, AGU, CF, TNH. We are exiting the position Potash now, which we added Wednesday. The cover was close to the same price that we shorted and believe that there may be more to this story and are not interested in getting caught in a short squeeze.
The move on volume was a signal that there is more to this story. Perhaps the rumor-mill is talking about takeovers again – like we saw with Mosaic recently. Either way, it is a good time to reevaluate this name and step aside until whatever is brewing passes.
As such, we have been shorting and covering Potash (POT) successfully between $101 and $85 recently.
According to Bloomberg reports:
K+S AG, Europe’s biggest potash producer, needs to sell shares as early as this year to bolster finances after a slump in demand for the crop nutrient almost wiped out profit, UniCredit analyst Jochen Schlachter said. A rights offer would help the company retain its credit rating level after tumbling orders weighed on third-quarter earnings, Schlachter said. K+S’s debut bond sale in September will give the company confidence it can convince equity investors to come forward with fresh funds, analysts said.
Yesterday morning Potash was down by about 2%. By mid-day it started a mysterious rise into the afternoon. Hearing the strength in Agriculture names is being attributed to positive intraday comments out from a boutique firm on POT, MOS, AGU, CF, TNH. We are exiting the position Potash now, which we added Wednesday. The cover was close to the same price that we shorted and believe that there may be more to this story and are not interested in getting caught in a short squeeze.
The move on volume was a signal that there is more to this story. Perhaps the rumor-mill is talking about takeovers again – like we saw with Mosaic recently. Either way, it is a good time to reevaluate this name and step aside until whatever is brewing passes.
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