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Strategies & Market Trends : Value Investing

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To: E_K_S who wrote (66567)	2/18/2021 3:18:34 PM
From: Elroy	Read Replies (3) of 78817

FWIW, I have other fertilizer/commodity plays that have done well but are trading outside what I consider fair value (reversion to the mean). Do you mean your other fertilizer stock are expensive, or cheap, or what? Most/all these commodity plays were more than 100% lower on the 3/2020 crash. Therefore, difficult to to see the value proposition unless interest rates and/or inflation perks up. UAN's share price is below where it was when the pandemic began (~$28). UAN is going to pay big big dividends in 2021. It should surely be double (or more) the price it was at when it paid zero? That will be the least of the concerns. Higher interest rates will blow up these companies living on 0% interest rates. UAN has $670m of ~10% junk debt eating up lots of its free cash each quarter. That debt can be refinanced this May 2021 with o pre-pay penalty. Since UAN was able to service this ~10% junk debt for the past 4 years (described as lowest prices for fertilizer in a generation, ie, an economic recession for fertilizer), surely they will get a much lower rate for the same debt in the current zero interest rate rising fertilizer price environment. Every dollar saved on interest payments will go to unit holders as a distribution increase. UAN is going to become a massive money machine by H2 2021 if fertilizer prices stay where they are. And all three fertilizer companies last night said prices are going to stay high for 2021. You're not excited about the UAN potential here? What am I getting wrong? It could easily pay $7.00 in 2021, and depending on the refinance $10.00 from there on out. UAN paid $4.00 over a four quarter period in 2018 when fertilizer prices were WAY below where they are now. What kind of $22 stock pays $7.00 per year? Anyone interested in UAN should read the earnings releases from major fertilizer companies CF, MOS and NTR from yesterday. All say fertilizer is going gangbusters, and the recent price increases are likely to remain in place.

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