Did Potash & Fertilizer Stocks Just Become Value Stocks? (MOS, POT, IPI)

Singapore’s sovereign wealth fund Temasek Holdings may have given agriculture, potash, and fertilizer investors an early, yet so far unnoticed, Christmas gift.  The Singapore fund has taken roughly a 6.5% stake in Mosaic Co. (NYSE: MOS).  Since the market had such a large move on Tuesday, the news is being mostly discounted today.  This news might be worth more than the market is giving it credit for.

The 17.9 million shares are worth close to $900 million, ad that is an exponentially larger stake that what Temasek owned at the end of the September quarter.  If Temasek wants an influential stake in one of the leading phosphate and potash suppliers, what does it mean for the valuations in Potash Corp. of Saskatchewan, Inc. (NYSE: POT) and Intrepid Potash, Inc. (NYSE: IPI)?

Temasek’s stake is now larger than Wellington’s 6.4% stake, but is still well under the Cargill Trusts that has been unloading shares.  We now know who likely absorbed more of the shares sales from those trusts.

Temasek’s effort to invest in resources and energy may be growing, particularly now that some of these shares have “gone on sale.”  Mosaic shares are down almost 45% from the 52-week high.  With a fund size of somewhere close to $150 billion, Temasek can afford to do deals of this size.  Effectively, this (in theory) gives the Singapore population some protection against rising potash and fertilizer prices in the future.  With a 0.4% dividend yield, the stake will not exactly be a high dividend for the sovereign wealth fund.

There is a tug of war taking place right now over the future of potash and other fertilizer prices in 2012 and beyond.  A slowing global growth story from India and China is meeting what had been solid pricing power from producers.  This news would be better received had it not been for Tuesday’s large rally followed by a post-Oracle concern about other areas deemed a bit more protected from a pending recession.

With Mosaic shares trading under 10-times expected forward earnings, even considering the international growth market risks, is it fair to ask if Mosaic is a value stock?

JON C. OGG