Does This Start an Ag Takeover Frenzy?
Traders who were long the Ag space woke up Tuesday morning to a pleasant surprise. Potash Corp. (NYSE:POT) rejected a bid that was slightly less than $39billion from BHP Billiton (NYSE:BHP). Potash has traded over $145 in the pre-market, which is significantly higher than the $130 bid from BHP. It seems that Wall St. agrees with Potash’s opinion that the bid was far too low.
Other Ag stocks like Monsanto (NYSE:MON), Intrepid Potash (NYSE:IPI) and The Mosiac Company (NYSE:MOS) are also trading up sharply in the pre-market in anticipation of coming takeover speculation in the group.
Ag stocks can be very volatile, much like penny stocks. They are also one of the few large cap groups that can provide the same type of high percentage gains that a rising microcap stock can. However, even though stocks like Potash have substantial earnings and revenues, they are generally traded by aggressive investors.
Today you will surely hear takeover rumors in other Ag space names on television and read them on the internet. You will surely be told about Cargill’s majority stake in Mosiac. Others will say play it safe and buy Market Vectors Agribusiness ETF (NYSE:MOO). Our advice is to be careful and not jump in right at the open. In other previous blogs we highlighted not buying gap ups on or near the open. Mainly because most times those gaps see some sort of retracement.
You may also see some limited impact on the OTCBB because of the massive Potash story and the sympathy in the group. Penny stock newsletters will surely write some reports on some Ag related hot penny stock.
Once again make sure you do some homework. While Ag valuations should be reset to the upside, it doesn’t necessarily mean that these premiums will apply to the stock that you own. Remember, good ideas on the long side happen on a daily basis. So if you miss one, it isn’t the end of the world. So for now I would form a penny stock list and a large cap list of potential Ag stock candidates. And that list should be researched and reviewed thoroughly before acting.
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