The Tide Turns for Mosaic (MOS, POT, CF)

Mosaic Co. (NYSE: MOS) was brutalized going into its huge secondary offering where Cargill and affiliated parties were selling 100 million shares.  Right before the offering, we had noted that Mosaic shares were down over 20% in the last three months versus a drop of only 12% for Potash Corp. of Saskatchewan (NYSE: POT) and CF Industries Holdings, Inc. (NYSE: CF) was down only about 5%.

Last Friday we saw that some 50 million shares had traded hands after the 100 million shares were sold at a slightly cheaper price than we expected at $65.00 per share.  Mosaic shares had been at $70.00 just a week earlier and over $77.00 a month earlier.  This offering had been known about for months and the shares were hit harder than peers going into the offering.

As we expected, the stock is recovering. The stock’s low close was last Friday at $65.42, but it has traded up each day since.  Four days of gains.  Monday was $66.75, Tuesday was $67.26, Wednesday was $$67.98, and Thursday was $69.15 and that close on Thursday was only one-cent under the day’s high.

The tide has turned and there are a few more days before the buying pressure stalls out.  We noted last week, “it would be easy to expect that shares could get back up to $70 or even $72 before profit taking from the new shareholders absorb so much stock.”

Now the analysts have gotten back on board since the event came to pass.  Mosaic had an average price target of $85 from Thomson Reuters right before the offering.  Here are some of the analyst calls made in the last seven days or so:

• Raised to Positive at Susquehanna;
• Raised to Buy at Stifel Nicolaus;
• Raised to Overweight at J.P.Morgan;

Mosaic is indicated up 0.5% at $69.50 this morning.  This one may begin to temporarily stall by the middle of next week if the same daily gains keep coming but the move here has gone as expected in the trader textbook.

JON C. OGG