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Friday September 03, 2010
Mosaic (MOS): A 'bull-mode' buy in fertilizers
by Mike Turner, editor Mastering the Markets  The agriculture-related stocks continue to move into my top tier of highest scoring stocks. Add to this, BHP Billiton's hostile take-over bid for Potash Corp. and it is easy to see how investor interest in this segment of the market appears to be heating up. Here, we recommend Mosaic (MOS). My time-cycle forecast charts do indicate a bounce higher in the market in the first couple of weeks of September. And even though I believe the broader market will move lower between the middle of September and the end of October, I do not think it will be enough to dramatically alter the pricing trend of this segment of the global market. Mosaic, with a market capitalization of $25.2 billion, produces potash, one of the primary ingredients in fertilizer. Mosiac is a Plymouth, Minn.-based subsidiary of agri-giant Cargill, Inc. Some of the key fundamentals include the following: 
The growth rate for total sales for the most recent quarter versus the same quarter a year ago is +16.7%. This compares with a growth rate in its industry (chemical manufacturing) of +15.0%, and the average growth rate in the S&P 500 of +11.0%. The growth rate in earnings for the most recent quarter versus the same quarter a year earlier is +169.3%. The growth rate for that same time period for its industry is +68.5%. For the S&P 500, the growth rate is +74.3%. The growth rate in earnings during the past five years is +31.6%, more than double the industry's five-year average growth rate of +14.3%. The S&P 500 average growth rate for the past five years is +7.3%. MOS's price-to-earnings ratio (P/E) of 30.6 makes it a bit overvalued compared with its peers. The technical picture for MOS is strong. Here are some of the key factors: MOS trades in zone 2 (see chart above), having just moved into this zone from zone 1. The trend is increasing. The average daily volume has been slightly increasing for the past few months on mostly increasing share price. This is a possible sign that momentum could be building in this stock. Institutional ownership is 25%, which is good, but just slightly below my "sweet-spot" range of 30% to 60%. Still, 25% is a strong indicator that big institutions may like this stock and may think its share price has upward potential. Both the industry (chemical manufacturing) and the sector (basic materials) are in bull-mode, although both have pulled back just a bit during the past couple weeks. "Bull-mode" is defined as an indication that the average price of every stock in MOS's industry and sector is above my 10-week, time-shifted trend-line and moving higher. This can also means that more money is likely flowing in to this industry and sector than flowing out. This could be putting pressure on MOS to move higher. Action to Take: Buy MOS with a limit order at $56.30; set an initial stop loss at $51.94. Our target price is $80. Learn more about this financial newsletter at Mike Mike Turner's Mastering the Markets. |
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