- Yamana Gold (AUY: NYSE): Buy 1000 shares at the open
- Silvercorp (SVM.To: Toronto): Buy 2000 shares on the open
- Mosaic (MOS: NYSE): Buy 300 shares on the open.
- Monsanto (MON: NYSE): Buy 100 shares on the open
- Terra Nitrogen (TNH: NYSE): Buy 100 shares on the open
- Potash Corp. (POT: NYSE): Buy 100 shares on the open
- Powershares DB Agriculture ETF (DBA: AMEX): Buy 1000 shares on the open
Silvercorp is an addition to our existing position. The company will be the most profitable silver company in the world in the months and years ahead. They already pay a dividend and if you were around for the previous metals run in the 1970s and 1980s you'll recall that there were many companies that paid healthy dividends. Silvercorp carries on that tradition. Their corporate headquarters are in Canada, and their main operations are in China. There's country risk with the position, but we believe this is minor relative to the opportunity for stellar growth.
Mosaic: We're adding a honking 300 shares to our existing position, as well as another 100 shares to our Potash Corp. holdings. Mosaic is one of the world's leading producers and marketers of concentrated phosphate and they're also a big potash producer. Prices for these fertilizer components are going to continue to rise for at least another three years, and will reach levels well above current expectations. This may be hard to believe given how strong both the commodities and the shares have performed. But the agricultural boom remains in an early stage of development. Diets in developing countries are increasing quantities of meat protein consumption, which adds demand for grains worldwide. The world's grain inventory supplies are at 40 year lows and the situation is so precarious that the CEO of Potash remarked a few weeks ago that we could see global famine if weather fails to provide perfect growing conditions for any of the world's leading grain exporting nations. Investing in the companies that boost agricultural productivity also is a back-door way to invest in water and the distribution of water. Arid countries that import grains not only boost their food stocks, but they reduce the need for domestic agricultural water use. Unfortunately, this is critical for the survival of hundreds of millions of people worldwide.
Our new position in Terra Nitrogen further increases our exposure to fertilizer stocks. As their name implies, they are a large nitrogen fertilizer producer. The corn cycle is a heavy nitrogen fertilizer user and weakness in nitrogen fertilizer producers relative to companies that focus on potash and other compounds has created a buying opportunity in the shares. We believe Terra Nitrogen will bounce back this summer as expectations for stronger nitrogen fertilizer sales across the industry come into focus.
Monsanto's seed sales should surprise to the upside, and the stock has corrected severely over the last month. This wild trading is common with Monsanto given it's high valuation. But the earnings growth story here is powerful and remains intact. Few companies have the dominating position that Monsanto controls, regardless of industry. When selecting companies that will benefit from the agricultural commodities super cycle boom, Monsanto is a logical selection.
Finally, as a way to stash some of our excess cash into non-dollar assets, we are adding 1000 shares of the Powershares ETF that holds roughly equal positions in the futures contracts of corn, sugar, wheat and soy beans. In our view, the Powershares DB family of commodities ETF deal with the potential problem of contract roll-over negative yield situations better than other ETFs, and they also track performance of underlying commodities well. The managers have a history of being able to generate respectable income distributions at the end of the year as well. At a later date, when we want to liberate some cash, we'll sell this position. But last week's sell-off in the grains was excessive and weather conditions remain supportive of stable to higher prices going into the summer.
We will return with our take on last week's events and our outlook for the near-term.
