Market Overview

Short Interest Swings In Fertilizer Stocks (IPI, MOS, UAN)

Shares of many fertilizer companies took a big hit at the end of the July with the announcement of the breakup of Belarusian Potash marketing cartel.

CVR Partners (NYSE: UAN), Intrepid Potash (NYSE: IPI) and Mosaic (NYSE: MOS) saw the most significant percentage upswings in the number of their shares sold short in the weeks after the news.

The short interest in Agrium (NYSE: AGU) and Potash Corp. of Saskatchewan (NYSE: POT) also increased between the July 31 and August 15 settlement dates.

However, the number of shares sold short in China Green Agriculture (NYSE: CGA) was pretty much the same as in the previous period.

And short sellers shied away from BHP Billiton (NYSE: BHP), CF Industries Holdings (NYSE: CF), CVR Energy (NYSE: CVI), Rentech Nitrogen Partners (NYSE: RNF), Sociedad Quimica y Minera (NYSE: SQM) and Terra Nitrogen (NYSE: TNH) in early August.

Below is a quick look at how CVR Partners, Intrepid Potash and Mosaic have fared and what analysts expect from them.

See also: First Solar, SunEdison See Surge In Short Interest

CVR Partners

Short interest in this Sugarland, Texas-based nitrogen fertilizer producer rose about 49 percent in the period to nearly 281,000 shares. That was the greatest number of shares sold short since February, and it represented less than one percent of the float. This followed a rise of about 15 percent in the previous period.

CVR Partners posted better-than-expected second-quarter revenue in early August but warned of a soft second half of the year. The limited partnership has a market capitalization of more than $1 billion and a distribution yield near 10.5 percent. The long-term earnings per share (EPS) growth forecast is about nine percent, and the return on equity is more than 25 percent.

The consensus recommendation of the analysts surveyed by Thomson/First Call is to hold shares. Their mean price target, or where the analysts expect the share price to go, is more than 14 percent higher than the current share price. That may be due more to the falling share price than to analyst optimism, though.

The share price is up about four percent from a recent multiyear low. The stock fell about 10 percent following the Belarusian Potash news and has yet to recover. Over the past six months, the stock has underperformed the likes of CF Industries, as well as the broader markets.

Intrepid Potash

This Denver-based potash miner saw short interest surge about 79 percent in the first weeks of the month to more than 11.85 million shares. That was the highest level of short interest in the past year and represented more than 26 percent of the float. Days to cover was more than two.

Intrepid Potash has a market cap near $941 million. It does not offer a dividend. The price-to-earnings (P/E) ration is greater than the industry average but the operating margin is greater than the industry average. Both earnings and revenue fell short of consensus estimates in the most recent quarter.

Six of the 14 analysts who follow Intrepid Potash now rate shares at Underperform. A month ago, only one analyst did so. The analysts' mean price target is only marginally higher than the current share price, meaning that analysts on average see little upside potential at this time.

The share price plunged more than 40 percent following news of the breakup to a multiyear low on August 6. Shares have risen more than seven percent since then. The stock has underperformed larger competitors Agrium and Mosaic, as well as the broader markets, over the past six months.

Mosaic

The number of shares sold short in this Fortune 500 company swelled more than 70 percent to around 19.38 million, the highest level of short interest in at least a year, and more than six percent of the float. The days to cover was less than two. Note that short interest has been rising since the end of June.

In the period, this phosphate and potash fertilizer producer set a deal with Saudi companies to jointly develop a phosphate production facility in the Kingdom of Saudi Arabia. Mosaic's market cap is less than $18 billion and its dividend yield is near 2.4 percent. The P/E ratio is less than that of peer Potash Corp.

Only eight of the 24 analysts polled recommend buying shares, though that is fewer than a month ago. Their consensus price target is about double the current share price, and it is a level the shares have not traded at since April of 2011.

The share price fell more than 22 percent following the big news. It has struggled to rise above that level since then, even hitting a multiyear low in early August. The stock has not only underperformed the broader markets over the past six months, but competitor Potash Corp. as well.

ETFs

Exchange traded fund Global X Fertilizers/Potash ETF (NASDAQ: SOIL) includes Mosaic, Potash Corp. and Terra Nitrogen among its top 10 holdings. Shares fell about 11 percent on the news of the Belarusian Potash break up, and they are now trading near a multiyear low.

See also: Short Sellers Shy Away From Coal Stocks

At the time of this writing, the author had no position in the mentioned equities.

Posted-In: Agrium BHP Billiton CF Industries Holdings China Green Agriculture CVR EnergyShort Ideas Trading Ideas General Best of Benzinga

 

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