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In focus this week: the big fertilizer question, Potash or Mosaic; AAPL could trounce Samsung; gas pressure on coal; and the SITFA.
If you follow my IU articles, you know I am huge fan of AAPL and am looking for $600 on the stock. I called for $600 when the stock was at $380.
A recent Journal article has just added fuel to the $600 fire
Samsung and AAPL have turned the smartphone market into a two-horse race. The Journal called it a Sea Biscuit and War Admiral match-up.
Right now they are neck and neck. This past quarter AAPL sold 23.9 millions phones and Samsung sold 23.5 million.
Samsung has an edge with a global distribution network second only to Nokia and they both have low-end and high-end phones. In fact, Samsung has a greater variety of phones that AAPL does not
But hold on! AAPL was able to beat Samsung in sales with no low-end phone at all. If, as the Journal suggested, AAPL were to introduce a low-end model, they could conceivably blow away Samsung.
As I have said before, AAPL has done the best sales job I have ever seen. Add that to their branding, technology and retail operation and you have a real juggernaut.
AAPL at $600, you heard it here first!
Gas Pressure on Coal
The incredibly low natural gas prices we have seen, the result of the huge amounts of shale gas production, are putting pressure on coal miners.
Gas powered electrical generation, as you would assume, has increased as gas prices have dropped. In the last 12 months, 24% of electricity came from gas and 42% from coal.
That’s up from 18% for gas and almost 50% from coal in just the last decade. In just the last three years, gas use has jumped almost 3% and coal has dropped about 6%.
Some big coal producers, Alpha Natural Resources for one, have announced cut backs to cope with the shift to gas-powered electricity.
Thirty-nine percent of all electrical generating plants in the U.S. are gas fired, while only 31% use coal. But, the coal plants had been used much more than gas. That’s changing.
While coal still has a big export market, their biggest customer is the EU, which isn’t setting anything on fire right now.
Central Appalachian coal prices have dropped 15.4% this year alone, following gas prices almost exactly.
The Journal called it a race to the bottom.
But the real unknown here, or maybe it isn’t too unknown, is the effect new regulations for cleaner burning electrical plants will have on coal use. Many coal plants have to be shut down completely to meet the new regs.
Coal doesn’t look like it has too many breaks coming and it could be bad news for coal miners.
Fertilizer
Most investors don’t realize that farmers worldwide have no choice but to use potash as a fertilizer. They can skip a year or two, but any longer than that and their production can drop by as much as 30%.
That’s how dependent food production is on potash. Add to that the fact that the world is consuming about 10% more food every year than it produces, and farmers will have to produce as much food in the next 10 years as they in the past 50, and the case for potash fertilizer come into sharper focus.
The two big players are Mosaic, MOS, and Potash of Saskatchewan, POT. POT just happens to have the same name as the fertilizer itself.
At first glance, MOS seems to have the nod as the best play, but a recent Seeking Alpha article says POT is the big winner here.
POT is expected to grow 78.4% in 2011 and another 13.5% next year.
A very conservative estimate puts this stock at about $55 from its current price of $46.
Mosaic, on the other hand, has some very good numbers, but not quite as lofty as POT. MOS is expected to grow by about 11.2% this year and 8.9% next.
Despite very tough times for the past three years, POT has managed to post some amazing numbers, but not so amazing when you consider that their customers have no choice but to use their product.
POT has a larger market share, is safer, less volatile and has a higher dividend than any of its competitors. It is the obvious choice.
SITFA
Finally, the SITFA award goes to a bunch of bureaucrats in India who were sitting on a license that a local snake charmer had applied for.
It seems the snake charmer wanted a small piece of land for his snakes, and according to him, the local government bureaucrats were waiting for a bribe before they would approve it.
So, the snake charmer pulled his only trump card and dumped a bag of poisonous snakes, cobras included, into the office of the of the local paper pushers.
To say all hell broke loose would an understatement. According to the news report, snakes started climbing on desks and chairs and hundreds of people ran for their lives.
My parents always advised me not to get in any spitting contests with snakes. I guess that includes snake charmers, as well.
But at least we know one way to get bureaucrats off their duffs.
There has been no sign of the snake charmer since he dropped off his bag of snakes.
Article by Investment U
