Velvet Ant

I rarely see these in my yard but today I caught one long enough to take a picture.

Investment Opportunity

The last time I posted about an investment opportunity was September 29, 2012.  I talked about NSC, a railroad, trading around $64.  If you had bought the stock, you would have had a rough few months.  The stock continued to decline after I made the post, but in my view that just made the opportunity all the more compelling.  Today, that stock is worth around $75.  For some reason, the market changed its mind about valuing the stock.  Now, I don’t think it is a great buy.   If only the stock had continued declining down to $50 what a phenomenal buying opportunity it would be!

Now, we have another buying opportunity, perhaps not quite as compelling as last time: “Potash Corporation of Saskatchewan, Inc.”, POT.  I consider this company to be the best publicly traded fertilizer company.  However, it’s eponymous [did I use that backwards? 🙂 ] product, potash, is running at lower prices than it was a year or so ago and this has caused the stock price to go down significantly.

Pros:

• Even if industry fundamentals deteriorate, POT will continue to be ok.
  • Operates in an oligopoly
  • Low production costs compared with competitors
  • Diversified with multiple types of fertilizer, though potash is dominant
• Fertilizer demand will continue to grow if global living standards or population continue to rise
• Its commodities will continue to grow more scarce as mines throughout the world are depleted, though the need can only be reduced by growing less crops or growing them in a much more fertilizer-efficient manner
• Company aims to be a leader in industry dividend distributions (2.9% currently, has grown quickly lately)
• Dividends allow diversification out of U.S. currency
• Appears to have a good management team
• Forward PE < 12 (I’ll grant estimates are not worth much, so this point is minor

Cons:

• Current PE > 15 (this is the only con but it’s a big one!)

This is a premium stock trading at a premium price, but it’s probably worth it.  I think anything below $40 is a good enough deal.  Below $30 would be an extraordinary bargain, but I think it’s very unlikely to get there.  In any case, be emotionally prepared for a long wait for the stock to reach the price it deserves.  Be patient: it’s a 30 year stock, not a 5 year stock!

Word Game

What do the following word pairs have in common?  What else would you add to the list?

• Chapter -> Chapiter
• Carmel -> Caramel
• Corner -> Coroner

Chayote – Part 2

The chayote has been in the ground a couple of weeks now.  It’s growing nicely and looking healthy.