CF Industries Holdings, Inc. is a North American manufacturer and distributor of agricultural fertilizers. They are the largest producer of nitrogen fertilizers in North America.
Pros:
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Sizable insider buying from the CFO and CEO started last summer.
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Demand grows at about 2% per year because farmers HAVE to put this stuff down every year.
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Analysts believe we have seen the bottom of the cycle for nitrogen fertilizer prices because a lot of supply has come of the market and continues to come off the market.
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North America relies on imports of these products because not enough of it is produced here, so being the largest manufacturer in North America has its advantages. Cheaper transportation costs and natural gas (used for refining) is easily accessible and thus cheaper.
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A lot of the idled production overseas due to oversupply is tough to get running again when prices rebound.
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CF’s current price to book is cheaper than its average over the last 5-10 years. If prices start to improve this stock could get back to the $50-$55 range.
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Stock price price is exactly where it was six years ago, but the production per share is now 3.5x what it was six years ago.
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A lot of insiders more recently exercised options and didn’t sell them.
Cons:
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Prices stay down due to less capacity falling off than expected.
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It doesn’t matter how well you are positioned for a recovery if the recovery doesn’t come.
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Top line revenue has fallen quite substantially since 2012, while production has grown over the same time (further showing how far prices have dropped).
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Operational income has been terrible lately.
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Free cash flow has been negative for the last three years (due to the expansion of capacity in this downturn).
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Timing this correctly is tough, once year over year production increases, the stock will already be shooting up.
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