Shares of Potash Corp. of Saskatchewan are up about 60 per cent in the last three months following BHP Billiton Ltd.'s $38.6-billion hostile offer.
Potash Corp. CEO Bill Doyle said Tuesday that BHP "will not be the only bidder." And the Globe and Mail's Brenda Bouw and Andy Hoffman report that Chinese state-owned chemical conglomerate Sinochem Group is weighing a potential counter-bid to BHP's unsolicited offer.
So what's an investor to do - cash out or hold on for a white knight?
Martin Roberge, portfolio strategist and quantitative analyst for Dundee Securities Corp., says large-cap fertilizer stocks are a good place to be right now based on fundamentals alone. His advice: don't sell.
"After a stellar crop season in the U.S. kept grain prices under pressure in the first half of 2010, severe droughts in China, and more recently in Russia, catapulted grain prices to new 52-week highs lately. Not only do rising grain prices [year over year]bode well for future fertilizer stock price out performance, but the ensuing recovery in farmers' margins/incomes suggest more fertilizer usage going forward."
Mr. Roberge says the fundamentals for the global fertilizer market hit bottom in the first half of the year. He's advising clients to stay overweight in fertilizer stocks, believing that North American players like Potash Corp. and Agrium Inc. will outperform the market for the rest of the year.