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The blue skies of late April certainly tempt any investor to take a Sunday stroll to enjoy nature’s bounty. The tree blossoms are bursting, the birds are chirping and the day is alive with possibilities. Breathe in….breathe out. Breathe in…breathe out. AAAAH…fill the lungs with that clean oxygen. SNIFF.....engage the sensory aroma of the….wait? huh?? What is that smell? As Gramma would say, “Who made tuss?”
No…it’s not tuss…..it’s fertilizer…lots and lots of fertilizer spread over every possible mulch bed and green grass landscape. Why do we have fertilizer? Well, plants have to eat too. If want to replace all of that CO2 we expel with oxygen, we have to take good care of our friends the plants.
Today I bought stock in Terra Nitrogren (TNH) at 256.00. I will sell it in 4 – 6 weeks at 295.32.
Here’s why I like TNH:
It’s pretty simple. I’m not scared of the high stock price. Why not? This company prints money. That’s right…it turns crap into money. Well, it’s not exactly that easy but this company’s stock has been on a major roll. Its shares are up around 70% this year and it has a three-year, average annual return of 31%. Its two chief products, ammonia and urea ammonium nitrate saw average selling prices increased by 21% and 79%, respectively, in 2011, contributing to an earnings increase of 153% to $508 million
I liked it last week and I like it even more now after a nearly $50 pullback in the stock price. That’s right folks, the world’s greatest momentum investor is buying a stock on the dip. With of P/E of only 15, the stock is cheap. The best part is if you’re worried about the momentum coming out of the stock, it pays a 7% dividend. That’s right…7%. That’s a lot of money coming back to you if you’re patient. So even though I think we’ll soon see growth in the stock price, owners of these shares will be handsomely rewarded even if the stock doesn’t return immediately to its recent highs.
One thing that is a pain in the neck is that this is an MLP, so if you buy this stock you have to wait forever to get your tax information from them. The good news is that I am buying this in my IRA account so I don’t even have to worry about filing all that crap on my tax return. Terra Nitrogen's high yield is largely explained by its MLP structure, which allows the company to direct its taxable income directly to shareholders instead of paying tax on that income.
Terra, with a market value of $5 billion, produces and is a wholesale distributor of nitrogen fertilizer products used by U.S. farmers. It has production plants in Oklahoma and Arkansas. That’s probably the most exciting thing coming out of Arkansas since Bobby Petrino fell off of his motorcycle.
CF Industries owns 74% of the company. It does not get Wall Street analyst coverage. Yay…no ANAL-ysts to screw up the estimates. Terra Nitrogen has the capacity to manufacture an annual 1.9 million tons of urea ammonium nitrate solutions and 1.1 million tons of ammonia. Ammonia is the key ingredient for most nitrogen fertilizer and many industrial products.
Urea kind of sounds like siss but it isn’t really and you’re not going to siss your money away by buying TNH. Urea, a key component in nitrogen-based ammonium fertilizer, saw its price move closely in line with corn's prices. This year is turning out to be a record year for corn plantings, with that crazy ethanol scam the government is running. Right now they put 10% ethanol in your gasoline. There is a lot of talk of this going to 15%. That would be a 50% increase in corn required for ethanol into gasoline. The punchline is that we’ll see continued strength in the company's top and bottom lines as long as we keep planting corn.
The National Agricultural Statistics Service recently advised that:
A. The USDA projects the largest corn planting in 75 years.
B. Corn futures surged due to tighter than expected supplies,
C. Fertilizer prices are firm and advancing.
Terra Nitrogen also has been able to gain an advantage over some industry peers because of its ability to avoid using higher-priced mined goods such as potash, which allows it to keep its costs down. The base feedstock for TNH’s products is Natural Gas. Now, even though $$$MR. MARKET$$$ is a large producer of natural gas himself (who made tuss?) he is also very aware that natural gas prices are very low. If you’re a company and your costs are lower, usually that means your profits will be higher.
Recent earnings report were net earnings of $129.8 million on sales of $201.0 million for the fourth quarter ended December 31, 2011. This compares to net earnings of $65.8 million on sales of $142.9 million for the 2010 fourth quarter. Net income allocable to Common Units was $71.5 million ($3.87 per Common Unit) and $48.3 million ($2.61 per Common Unit) for the 2011 and 2010 fourth quarters, respectively.
For the full year 2011, TNH reported net earnings of $508.0 million on sales of $798.9 million. This compares to net earnings of $201.6 million on sales of $564.6 million in 2010. Net income allocable to Common Units was $283.6 million ($15.33 per Common Unit) and $148.2 million ($8.01 per Common Unit) in 2011 and 2010, respectively.
This increase was due primarily to higher ammonia and urea ammonium nitrate solution (UAN) selling prices.
• Ammonia and UAN average selling prices increased by 21 and 79 percent, respectively.
• Realized natural gas unit costs decreased by seven percent.
Demand for crops like corn (which needs a lot of nutrients) is likely to increase as it is a staple food item and is used both for livestock feed and for producing ethanol. Corn is a big export product. China bought 900,000 metric tons of American corn last year which is proof of the crop's surging demand. With the Chinese demographics we know this trend will most likely continue. Growing global population and rising spending power (especially in the emerging nations) should keep the demand for fertilizers firm. The threats from international producers is completely lame. Imported ammonia just can't get here, so the price you get for it really all about demand vs. producer inventory and supply.
The big question for Terra Nitrogen going forward is what will happen with crop prices. When farmers have money to spend, they tend to use it to enhance crop yields by buying fertilizer. That boosts demand and helps Terra Nitrogen and its peers raise the prices they charge for their products..
I think all systems are go. I’m buying a great momentum stock on the dip. I am buying stock in a company whose earnings are ridonculous. I’m also very happy to sit back and watch my 7% dividend come in. It beats the crap out of 1% in my savings account.
This ain’t no bullcrap. This is fertilizer. They may grow them big on the farm, but the fattest thing out of this investment is going to be my wallet.
I am HUGE!!
$$$MR. MARKET$$$
Let me know what you think of this write up.
No…it’s not tuss…..it’s fertilizer…lots and lots of fertilizer spread over every possible mulch bed and green grass landscape. Why do we have fertilizer? Well, plants have to eat too. If want to replace all of that CO2 we expel with oxygen, we have to take good care of our friends the plants.
Today I bought stock in Terra Nitrogren (TNH) at 256.00. I will sell it in 4 – 6 weeks at 295.32.
Here’s why I like TNH:
It’s pretty simple. I’m not scared of the high stock price. Why not? This company prints money. That’s right…it turns crap into money. Well, it’s not exactly that easy but this company’s stock has been on a major roll. Its shares are up around 70% this year and it has a three-year, average annual return of 31%. Its two chief products, ammonia and urea ammonium nitrate saw average selling prices increased by 21% and 79%, respectively, in 2011, contributing to an earnings increase of 153% to $508 million
I liked it last week and I like it even more now after a nearly $50 pullback in the stock price. That’s right folks, the world’s greatest momentum investor is buying a stock on the dip. With of P/E of only 15, the stock is cheap. The best part is if you’re worried about the momentum coming out of the stock, it pays a 7% dividend. That’s right…7%. That’s a lot of money coming back to you if you’re patient. So even though I think we’ll soon see growth in the stock price, owners of these shares will be handsomely rewarded even if the stock doesn’t return immediately to its recent highs.
One thing that is a pain in the neck is that this is an MLP, so if you buy this stock you have to wait forever to get your tax information from them. The good news is that I am buying this in my IRA account so I don’t even have to worry about filing all that crap on my tax return. Terra Nitrogen's high yield is largely explained by its MLP structure, which allows the company to direct its taxable income directly to shareholders instead of paying tax on that income.
Terra, with a market value of $5 billion, produces and is a wholesale distributor of nitrogen fertilizer products used by U.S. farmers. It has production plants in Oklahoma and Arkansas. That’s probably the most exciting thing coming out of Arkansas since Bobby Petrino fell off of his motorcycle.
CF Industries owns 74% of the company. It does not get Wall Street analyst coverage. Yay…no ANAL-ysts to screw up the estimates. Terra Nitrogen has the capacity to manufacture an annual 1.9 million tons of urea ammonium nitrate solutions and 1.1 million tons of ammonia. Ammonia is the key ingredient for most nitrogen fertilizer and many industrial products.
Urea kind of sounds like siss but it isn’t really and you’re not going to siss your money away by buying TNH. Urea, a key component in nitrogen-based ammonium fertilizer, saw its price move closely in line with corn's prices. This year is turning out to be a record year for corn plantings, with that crazy ethanol scam the government is running. Right now they put 10% ethanol in your gasoline. There is a lot of talk of this going to 15%. That would be a 50% increase in corn required for ethanol into gasoline. The punchline is that we’ll see continued strength in the company's top and bottom lines as long as we keep planting corn.
The National Agricultural Statistics Service recently advised that:
A. The USDA projects the largest corn planting in 75 years.
B. Corn futures surged due to tighter than expected supplies,
C. Fertilizer prices are firm and advancing.
Terra Nitrogen also has been able to gain an advantage over some industry peers because of its ability to avoid using higher-priced mined goods such as potash, which allows it to keep its costs down. The base feedstock for TNH’s products is Natural Gas. Now, even though $$$MR. MARKET$$$ is a large producer of natural gas himself (who made tuss?) he is also very aware that natural gas prices are very low. If you’re a company and your costs are lower, usually that means your profits will be higher.
Recent earnings report were net earnings of $129.8 million on sales of $201.0 million for the fourth quarter ended December 31, 2011. This compares to net earnings of $65.8 million on sales of $142.9 million for the 2010 fourth quarter. Net income allocable to Common Units was $71.5 million ($3.87 per Common Unit) and $48.3 million ($2.61 per Common Unit) for the 2011 and 2010 fourth quarters, respectively.
For the full year 2011, TNH reported net earnings of $508.0 million on sales of $798.9 million. This compares to net earnings of $201.6 million on sales of $564.6 million in 2010. Net income allocable to Common Units was $283.6 million ($15.33 per Common Unit) and $148.2 million ($8.01 per Common Unit) in 2011 and 2010, respectively.
This increase was due primarily to higher ammonia and urea ammonium nitrate solution (UAN) selling prices.
• Ammonia and UAN average selling prices increased by 21 and 79 percent, respectively.
• Realized natural gas unit costs decreased by seven percent.
Demand for crops like corn (which needs a lot of nutrients) is likely to increase as it is a staple food item and is used both for livestock feed and for producing ethanol. Corn is a big export product. China bought 900,000 metric tons of American corn last year which is proof of the crop's surging demand. With the Chinese demographics we know this trend will most likely continue. Growing global population and rising spending power (especially in the emerging nations) should keep the demand for fertilizers firm. The threats from international producers is completely lame. Imported ammonia just can't get here, so the price you get for it really all about demand vs. producer inventory and supply.
The big question for Terra Nitrogen going forward is what will happen with crop prices. When farmers have money to spend, they tend to use it to enhance crop yields by buying fertilizer. That boosts demand and helps Terra Nitrogen and its peers raise the prices they charge for their products..
I think all systems are go. I’m buying a great momentum stock on the dip. I am buying stock in a company whose earnings are ridonculous. I’m also very happy to sit back and watch my 7% dividend come in. It beats the crap out of 1% in my savings account.
This ain’t no bullcrap. This is fertilizer. They may grow them big on the farm, but the fattest thing out of this investment is going to be my wallet.
I am HUGE!!
$$$MR. MARKET$$$
Let me know what you think of this write up.
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