POT at $30.55, MOS at $42.38, and IPI $12.61 are all great buys. Let’s take a closer look to understand why.
On July 30, Russian potash producer Uralkali informed the public it was pulling out of its sales partnership with Belarus, one of two groups in a global cartel commanding two-thirds of a nearly $22 billion potash market. The silly Russians sent potash-mining stocks into a tailspin around the world. Uralkali predicted that the move would slash potash prices by 25% to about $300 a metric ton by the end of year.
The two potash “distributors”, Belarusian Potash Co. (BPC) and North America’s Canpotex are rumored to set identical prices in major markets, operating what some customers say is a cartel. So now Uralkali has decided to cut out the middle man (?) and sell directly to customers. This is bad for potash prices. But lower potash prices also hurt Uralkali. Something about this self-mutilating behavior does not make sense. Aren’t Russians really smart chess players, mathematicians, strategists? What kind of numb-nuts would purposely kill the profitability of their own industry? We don’t believe for one second that Uralkali is a fool. Our gut tells us that someone was either short some competitors or someone wanted to drive competitors prices lower to make mergers, acquisitions, and takeovers more feasible. Something about someone’s behavior is just not right.
Fortunately for us, we did not have any position in potash stocks because they had little upward potential and significant downward potential. Now that ONE cartel member has decided to no longer play nice, it unleashed massive downward pressure. Everyone and their grandmothers have panic jumped out of potash stocks. So company fundamental be damned, everyone wanted out.
The dust has now settled, and the situation is becoming clearer. Everyone that wanted out is out, everyone that was shaky is out, and everyone who was bullish panic-sold out. The sellers have left the building and big money has stepped to build a new floor on the stock price. Perfect time to buy, catch a little bounce and get out before the verdict is out whether or not the floor was set too low or too high. But do we really want out now that we are in?
Oh hell no! After extensive analysis these last few days, it was discovered that one of those 3 stocks is a gem. When analyzing IPI (Intrepid Potash Inc.), we accidently stumbled into those stock opportunities that just makes you giggle. First off, we could only find ONE reason to sell IPI, and that was Uralkali released information (which is old information and definitely priced in). However, we found many reasons why IPI is a short, medium and long term opportunity. The charts are all bullish. The MACD, MFI, ROC, RSI, slow stochastic, fast stochastic, volume, and Vol+MA all indicated bullishness.
As conservative investors, who is wrong 1 out of 100 trades, charts alone aren’t a good enough reason for us to buy. You see, at Alphas Edge, there are stringent rules and guidelines that greatly improve the odds of making money, and we follow them. So we started to research with the goal of quantifying the future for Intrepid Potash and what we found pleased us. They have a few large scale projects that are expected to greatly increase production and at the same time reduce production cost. That smells like money to us. But don’t take our word for it, do you own research.
But there is more, oh, much much more! We never just look at a stock as a buying opportunity. We also analyze it as a shorting opportunity. So we did my detailed analysis of stocks we would want to short and IPI failed miserably. In fact, it is one of the RISKIEST shorting opportunities that we have ever come across. First, with over 12% of the float shorted, shorting IPI is a crowded trade. Second, as mentioned above, everyone that wanted out is out and a floor has been created (by a WHALE). Third, there is significant potential for good news (or rumors). Four, an IPI short squeeze would be catastrophic (picture shorting at $12.70 and having it squeezed to $15.20…ouch). Lastly, it appears that IPI is a TAKEOVER TARGET! Yes, you don’t want to be short a takeover target, lol.
According to Whale Wisdom, Koch Industries Inc. has recently purchased 1,380,000 (13F Holding) shares of IPI. This is a new position for them. (Sigh, we can’t wait until we open up new positions by purchasing over 1 million shares!). Koch Brothers is one pair of coattails that we don’t mind riding. When they buy in, they accumulate.
Now, it’s not just that Koch Industries is a big time investor; they currently own Koch Fertilizer LLC. This acquisition is a natural fit.
In addition, they love green projects, such as Intrepid Potash’s HB Solar Solution Mine Project
So, digging around we feel that there is a very good chance that IPI is a takeover target.
Oh, and lets not forget the new development!
“Belarus officials detained Uralkali Chief Executive Officer Vladislav Baumgertner after inviting him to Minsk for talks. He’s still chairman of Belarusian Potash Co., the joint venture with state-owned Belaruskali that the Russian company said July 30 it was withdrawing from.
Baumgertner was charged with abusing his office at the venture and could face as many as 10 years in prison if found guilty, Pavel Traulko, a spokesman for Belarus’s Investigative Committee, said yesterday by phone.
Belarus officials have issued warrants for the arrest of four more Uralkali executives, accusing them along with Baumgertner of a scheme to cut Belaruskali out of decision-making at the venture, causing damages and losses of about $100 million.”
In conclusion, lots of reasons to buy potash stocks, but in particular Intrepid Potash (IPI). There are lots of reasons to NOT short Intrepid Potash. There is only one priced-in reason from a self-mutilating Russian to not go long IPI.
We are LONG IPI and SHORT silly Russians!
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