Kiss Off MOS (Mosaic Company)

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.

7) A big MOS deal announced yesterday and earnings coming out next Friday.

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!

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5 thoughts on “Kiss Off MOS (Mosaic Company)

  1. Yes, that happens around half the time, but thanks anyway for the Monday morning quarterbacking. The system doesn’t require to be right every time, luckily (and of course). It’s the interplay between the “win/loss” ratio and the size of the average “win” vs. the size of the average “loss.” And strategy there is, again of course, to make sure the winners are bigger than the losers. And, again of course, the primary way to do that is to cut every loss very quickly. It does not pay to argue with the market. Make a hypothesis and test it… if it proves out, let it run, if it doesn’t cut it. That what we do in the arena.

  2. As I write this, MOS is at $100, after having run up for a couple months after this post, then reversing hard. So in response to wabisabi’s 2008-4-5 comment: I was early, which is often the case with me — search this blog for posts on housing, FannieMae, among others. That’s why, with these kind of stock trades, it’s usually best to wait for a definitive signal and/or leg in instead of dive in, unless perhaps if you get a massive upside or downside blowoff and key reversal.

  3. Article excerpt:

    “Dot-Corn’ Shares Mirror Dot-Com Stocks Bubble”
    2008-08-19 23:00:10.0 GMT
    By Michael Patterson

    Aug. 20 (Bloomberg) — This year’s drop in agricultural stocks, whose rally since 2003 outpaced the gains in technology shares that preceded the dot-com crash, may deepen as the economic slowdown reduces profits, according to Citigroup Inc.

    “Investors have been stung of late in farm equipment and fertilizer stocks, but more pain could be coming,” Tobias Levkovich, Citigroup’s chief U.S. equity strategist, wrote in a research note on Aug. 18. “There are significant cracks in the agricultural economy story. We have been very anxious that investors had gotten carried away with the global growth theme.”

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