After kicking around a few interesting emails from a portfolio-manager friend in London, I went negative on Mosaic Company (MOS). Here’s why (note, this was longer, but my computer just crashed so we’re doing the cliff-note version):
Email #1: Was about a “Mysterious discrepancies in grain prices baffle experts” article. I said the gap should be no surprise unless it’s so wide that it could be profitably arbitraged away. He replied that a huge commodity hedge fund (Ospire), just agreed to pay $2 billion for ConAgra’s grain trading business.” That got my spider-senses tingling.
I mean CAG is the insider selling after a huge rally to a financial buyer. Could it be the “last big buyer is in” kind of thing? The one who decides to spend billions of dollars AFTER a massive run up? Maybe. After all, there’s usually a big transaction marking a turning point. It’s one of the key indicators.
Email #2 was comparing agricultural stocks to solar stocks, which became over-loved and ran out of steam. That email named some names, the charts of which I pulled up. One of them caught my eye (MOS):
Here’s are some quick and incomplete puzzle pieces:
1) Long and massive run in commodities and commodity stocks.
2) Recent massive up and down volatility in commodities (before it was “only” up).
3) Everybody bullish (ok, not everyone, but you know what I mean).
4) High expectations baked into the cake.
5) An insider selling to a financial buyer for a huge price.
6) The financial buyer, of course, using lots of other people’s money.
Eight) And, 8, 8, 8, I forget what 8 was for.
9) Technicals: Failed breakout at point #1, new highs on low volume and then failure at point #2, lower high at point #3, lower low at point #4, rally on weak volume at point number #5, which brings us to today, which is currently showing a red candle with a tall upper shadow and small body. That type of candle can be a reversal signal, of course. And it comes and at a resistance level.
10) And, 10, 10, 10 for everything, everything, everything, everything!
There you have it! As the Violent Femmes say, “Kiss Off” MOS!