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The Oxen Report: Midterm Trade in Agricultural Giant

Good morning to everyone. So sorry I am just getting to posting now. I had a slight issue with my power last night. The good news is that Worthington Industries was a gem at the open. I was out at 16.00 this morning. After an entry of 15.35, that gave me a gain of 4.30%. The Overnight Trade decision worked out very well for us. In addition to Worthington, we had a 2% gain on a Short Sale of Thor Industries (THO) yesterday.

The market is looking a bit bleak this morning, but I am working to find a new play for us today. In the meantime, feel free to ask me any questions as we get caught up.

 

Midterm Trade: Mosaic Co. (MOS)

Analysis: Starting next week, earnings of significance really start to pick up again for the end of the June – August Q2 earnings season. The week starts out with a Monday after close earnings report from Mosaic Co. (MOS). The company produces phosphate and potash fertilizers and is slated to have their best quarter in years – perhaps ever. Average EPS estimates come in at 0.72 vs. one year ago at 0.23, a gain of over 200%. The company has seen a large rise in their product as agricultural exports and farming has picked up this spring/summer season. 

The company additionally has a small nitrogen-based crop nutrient sector that is directly related to the price of natural gas. Natural gas is at an all-time low right now, and it is making the process of producing a nitrogen-based fertilizer very cheap. Natural gas in the June-August timeframe was at around $4.00 compared to $14.00 in the year prior. This price cut is huge for that portion of the Mosaic business.

In the last three months, the company has received an upgrade from Susquehanna, which is always a positive side. The company argues similar ideas to what I am saying and comments that the long-term sustainability and takeover possibilities for fertilizer companies makes them very attractive. Another nice commentary is that an independent research found that there is enough phosphate to make fertilizer for another 300-400 years. The USDA also commented that the average income of a farm has risen 24% in 2010. This is due to heavy demand overseas and rising demand in our own country.

With all these positive pieces of information coming to the forefront and MOS expecting to report its best quarter in quite some time, one would expect that Mosaic would be trading at 52-week highs. The company actually has sold off heavily in the past few days, and it has created a great buying opportunity. One fear is that the company has missed estimates the three quarters before Q2 when the company surprised on the positive side. 

During those times, however, the agriculture business really was not operating well, and these companies were struggling. The case is no longer the same. With the technicals showing a nice neutral valuation on RSI and about 7-8% growth to its upper bollinger band, Mosaic looks poised for a nice rebound moving into and possibly out of earnings.

Get involved today while the price is low!

Entry: We are looking to enter at 58.50 – 58.80.    

Exit: We are looking to exit for a 3-5% gain.

Stop Loss: 4% on bottom.

 

Good Investing,

David Ristau 


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  1. Oxen Alert – New Midterm Trade


    Hey all,

    We have a new Midterm Trade we are taking a look at in Mosaic (MOS). The stock looks poised for 3-5% growth over the next couple days.

    Check out my analysis, entry, exit, etc. here!

    Good Investing!


  2. Interesting. Phil just called a short on MOS. "MOS is #5 on my list.  I like DE and CAT too much to short them but MOS is way overpriced with huge earnings and forward guidance expectations.  The Nov $52.50 puts are $1.10 so that’s my play there."


  3. Jvest -

    Well, I guess we will see who is the smart one. Any bets?


  4. Oxen Alert – Entry/Exit on MOS, Longterm Ratings

    MOS – I am involved at 58.60. I am looking to gain 3-5%, so that puts me in the range of 60.36 and higher. Phil it appears is betting against me, so we will have to see what happens.

    Longterm Ratings:

    GMCR – It appears that two more companies have come to the legal battlefield and are taking class action lawsuits against Green Mountain. This does not look good for GMCR. I am at a strong Sell still.

    No other news to update. If you missed, SKX moved out of Buy range.

    Good Investing!


  5.  david – I don’t think I’d want to bet against either of you. Maybe it’s time to buy a straddle.   :)


  6. Jvest -

    Haha sounds good.


  7. Mosaic doing nicely so far…


  8. Repost from Phil’s board:
     
    tuscadog 
    September 30th, 2010 at 1:58 pm 
    Phil /SKX   OK, posted to my Seeking Alpha blog.  Link for all is
    http://seekingalpha.com/instablog/729278-retailprodog/97729-why-sketchers-will-shape-up?source=new_post_submission


  9. Diamond -

    Yeah saw it. His price target is much too high IMO. Not a lot of financial analysis done just a lot of words.


  10. Just sold my SKX positions in my personal account that sort of follows the Longterm Ratings.


  11. What’s the view on THO now ?