Friday, January 22, 2010

In praise of value

I'm a value investor. As of this week, that is.

I own, for instance, Potash Corp. of Saskatchewan (POT.TO), the world's largest producer of this crop nutrient. A Canadian value to boot. I've traded this stock several times in the past year and made some quick and easy money each time. But I have not yet held it like this, as a  v a l u e  i n v e s t o r. (My good old friend gb used to promptly redefine those stocks which, once he bought them, were just as promptly taking a dive (as it happens, a frequent occurrence), as long-term, value investments.)

Potash prices have been going down, along with the potash miners on their way to work, for a long time now. Potash is the common name for various compounds containing potassium, which are used mainly as fertilizers. An eventual rebound is to be expected, as economies improve and soil fertilization, unlike the Canadian Parliament, can no longer be prorogued.

And if I'm really lucky, the rumoured potential acquisition by BHP Billiton will materialize, and provide a great opportunity to sell. Now that would be good value. (Like striking gold. Or potash.) (Agrium Inc. is still trying to buy reluctant CF Industries, which in its turn finally gave up — for now?! — trying to buy Terra Industries. All this fertilizer business smells a bit. Is anyone still doing any actual drilling out there?) Sir, would you like some potash with that? But I digress.

What really did it, what really whisked me over to the value camp, was the acquisition this week of the Mother of all value shares. No, not this one (BRK.A), this one (BRK.B, the class B common stock):

Which is close enough. And courtesy of a 50:1 Mother of all stock splits. As you know, Warren (I feel I can call him that now) is, still, the Mother of all value investors (or, perhaps, the Father of). When he buys one railroad company, all of them go up, as if everybody will all of a sudden rush to buy trains. So I'm very optimistic.

My experience with the maternal superlatives is mixed. I once had a dream of working for the Mother of all companies in my field. Once I was hired, I wanted to leave within the first few months. Things were far from what I expected. Then 'inertia' took over, and I hanged on in there (for too long). I had, along the way, the best of times and the worst of times. I hope for better results overall with Berkshire.

And with Potashkewan too.

Oh the dickens, what a week!

Charts: Globe Investor

1 comment:

  1. Like your blog. If you would like to appear in the Globe and Mail’s Me and My Money column, let me know. For samples of the column, see link.
    Larry MacDonald
    Mccolumn at yahoo dot com