Zacks' Voice of the People highlights opportunities with Potash, Agrium - Press Releases

For Immediate Release

Chicago, IL – August 26, 2010 – Zacks highlights commentary from People and Picks Trader “RacerX33”.

For more Voice of the People, visit http://at.zacks.com/?id=5851

Featured Post

Speculative Takeover Play

I had planned to write my next article on my top 5 current bargain picks, but I'm going to postpone that one. I just came up with a potential trade and I'd like to get some feedback on it.

The Idea:

Potash (POT) BUY Agrium (AGU) Diagonal Bull Call Spread

The Rationale: I have decided to close my POT position. I still have a final bid target of $160/share, but I don't know how long that will take to materialize. Additionally, by staying in I run the risk of BHP pulling their bid altogether.

If that were to happen, I expect POT would drop to at least the pre-bid price of about $110. I figure the potential gain from here would only be about 7%, while the potential loss would be about 26%.

Once those funds are free, I would like to redeploy them into another potential target. I believe that AGU is a great potential takeover target. First, POT could launch a bid for AGU as a way to make it more difficult for BHP to buy them out. AGU would be a natural fit for an acquisition by POT. They share the same line of business, and are both based in Canada. Second, another outfit could make an offer on AGU. With the renewed interest in potash I believe that we could see some more takeovers in this arena.

According to a 2007 report by Ernst & Young, the average long-term takeover premium for US companies is 24%. I know that this isn’t an exact fit for this situation, but I think it gives me a pretty good starting point. To leave some room for error, I'll assume a 20% premium in the case of an AGU takeover. This would put AGU's price at about $80/share.

As an added bonus, AGU has been climbing nicely, and appears to be technically strong. At the same time, AGU has not had a substantial run-up since the POT bid.

About Zacks

Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 by Leonard Zacks. As a PhD in mathematics Len knew he could find patterns in stock market data that would lead to superior investment results. Amongst his many accomplishments was the formation of his proprietary stock picking system; the Zacks Rank, which continues to outperform the market by nearly a 3:1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit From the Pros by going to http://at.zacks.com/?id=5958.

Follow us on Twitter: http://twitter.com/ZacksInvestment

Join us on Facebook: http://www.facebook.com/home.php#/pages/Zacks-Investment-Research/57553657748?ref=ts

Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.

Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.

Disclaimer: Past performance does not guarantee future results. Investors should always research companies and securities before making any investments. Nothing herein should be construed as an offer or solicitation to buy or sell any security.

Contact: Brent Billock
People & Picks Manager
Company: Zacks.com
Phone: 312-265-9307
Email: pandp@zacks.com
Visit: www.Zacks.com

 

 
AGRIUM INC (AGU): Free Stock Analysis Report
 
POTASH SASK (POT): Free Stock Analysis Report
 
Zacks Investment Research