Fortune Returns at Mosaic (MOS, POT, CF)

Mosaic Co. (NYSE: MOS) keeps recovering from its 100 million share offering from Cargill.  The overhang is now behind it, and we are seeing that Wall Street analysts are continuing to warm back up to the name.  When we looked at this on a comparative basis just last week, Mosaic shares had fallen by almost 25% going into that huge stock offering.  Peers were mostly better off with only a drop of about 12% for Potash Corp. of Saskatchewan (NYSE: POT) and only a drop of about 5%  CF Industries Holdings, Inc. (NYSE: CF).  Now the tide is turning.

Two Fridays ago there were some 50 million shares traded after the 100 million shares were sold at $65.00 per share.  Our take is that most investors were buying and holding rather than flipping the shares.  The price history going into the offering was that Mosaic shares were at $70.00 just a week before the offering and over $77.00 a month before the offering.  The deal was telegraphed long ahead of time. What we have witnessed is almost a textbook recovery for stock traders and investors. 

Mosaic’s low close on the day of the offering was $65.42, but it has traded up each of the last six days since.  Last week’s closes were as follows: Monday was $66.75, Tuesday was $67.26, Wednesday was $$67.98, and Thursday was $69.15, and Friday was $70.04.  Then came a close this Tuesday of $70.85.

Before you get too excited and just chase indefinitely, six days of a recovery is difficult to keep calling and we have already noted, “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.”

The analysts have been steadily upgrading Mosaic 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;
• Raised to Neutral at Atlantic Equities;
• Raised to Buy at Citigroup;

Nothing rises forever nor does anything rise indefinitely.  The good news is that shares opened down and are back up so far this morning.  The buying seems to continue.  Just do not be surprised when you see a trading sell-off now that shares are up almost 10% from the secondary offering lows.  Ultimately, Mosaic shares can continue their recovery. 

At 8:44 AM EST we have shares up 0.44 at $71.29.  Its 52-week trading range is $37.68 to $89.24 and Thomson Reuters has a consensus analyst price target objective north of $84.00.

JON C. OGG