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Strategies & Market Trends : Value Investing
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To: Paul Senior who wrote (58870)1/6/2017 8:23:35 AM
From: E_K_S  Read Replies (1) of 78741
 
What's you value proposition for selling these stocks? I still have an overweight position and still think they have a ways to go based on the food deflation cycle/reversion to the mean basis. EPS are still quite low and s/d now begin to rise. In fact, I think we are in just the beginning of a multi quarter acceleration in earnings.

From my last Buy in UAN, shares are +43% from their lows last year but I still think there is another double in prices in the next 18 months.

I suppose on trailing earnings this and many of the other fertilizer stocks may/could be at/near fair value. FWIW, I also see CORN breaking out of multi year lows and that commodity has a ways to go higher (based on reversion to mean). This to me would be the catalyst for fertilizer prices to rise.

The capital required to duplicate/build the manufacturing facilities is the same or more than what was required 5 years ago and the market had priced those assets significantly more then than now. The input feed-stock is higher so the cost to manufacturer the end product will be marginally higher than 8 months ago but we have yet to see higher end prices especially the per unit prices we had 36-48 months ago.

I plan to hold my undervalued position until I see those end unit prices move higher. Like many of the undervalued 'value' investments, the sell proposition is many times harder to determine than the buy/entry point. The gains recently are pretty big but I still think we have a ways to go.

The corollary argument is that it is never wrong to book a profit.

EKS
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