Swing Trade, Round 5: Buy – Food for Thought

Just bought some shares of the fertilizer company, Potash Corp. I think this is a great opportunity to make some easy money, if I’m lucky. I’ve only used $600 of my own cash for now. It might not sound like much but that’s because I’m going to borrow extra money from the bank and leverage it up to roughly $2000!

Earlier today I bought 45 shares of Potash Corp at $43.74 each.
Initial investment: $600
Leveraged up to $1,978.29

 

This means I bought almost $2000 worth of stocks for only $600. My bank was nice enough to provide me with the remaining amount I’m short on. That means I owe the bank money, (at 4.25% interest annually) but I believe it’s worth the extra risk.

I’ve always liked this company. They specialize in fertilizers, animal feed, and other chemicals used to produce food. As they say in their advertisements, potash is food for the food we eat :). They also have a great balance sheet and trades at a decent 11 x forward earnings. They are the largest potash producer in the world and a leading phosphate and nitrogen producer. They will continue to be profitable as long as people continue to eat (=^_^=). Why did I buy Potash now? Because over the last year the stock has been falling. But lately it has bounced off a low and is moving up with above average volume. I think they have reached an inflection point.  The short-term technicals for this company is simply too amazing of an opportunity for me to pass up. By the way, Potash Corp is also publicly traded on the NYSE for those interested in the US.

My strategy is simple. I will consider selling this stock when it gets above $48. Or I will buy more of this stock if breaks support and falls below $39, thereby lowering my average cost base and I will sell another day. Since this is a S&P/TSX 60 listed blue-chip company, and is a leader in its industry, I’m not concerned about it going out of business any time soon ;-D

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hithatsmybike
06/27/2012 12:41 am

Nice. I like your stock investment posts. Sounds like you’re making a solid investment here.

I need some cash to fund my margin account =\ I have one, but I haven’t used it because I put most of my money in my TFSA stock account and you can’t borrow in there haha

Liquid
Admin
06/27/2012 6:06 am
Reply to  hithatsmybike

You did the correct thing. I made a TFSA contribution earlier this year. Too bad the limit is only $5K. Enjoy the rest of your Euro trip :).

Modest Money
06/27/2012 7:00 am

I really like this kind of strategy. It all makes a lot of sense to me, especially with a company that has a lot of potential. I’m looking forward to meeting up sometime soon to discuss this kind of thing.

Liquid
Admin
06/27/2012 7:05 am
Reply to  Modest Money

Hopefully it won’t turn into a disaster. My other swing trade from early June is currently below water lol, but I’m betting it will recover soon.

agentfang
agentfang
06/27/2012 11:56 am

Potash has been beaten up over the last year, and I’ve been caught in that and lost. I still think it’s a great company for the long run 🙂 How much are you on margin overall in your portfolio? Would love to see the figures behind the blurred out sections!

Liquid
Admin
06/27/2012 12:49 pm
Reply to  agentfang

I’m only borrowing around $19,000 of margin right now in an account with total securities worth $31,000. Basically 61% of what I have in this account is bought with margin. I pay between $500 to $600 a year in after tax interest to service this debt, but I think as long as I can make more than $600 a year with someone else’s $19,000 then I’m going to do it :D.

Steve@The Loonie Bin
Steve@The Loonie Bin
06/28/2012 6:33 pm

I was tempted to invest some money in Potash Corp when it hit $40 but decided not to. Too many projects on the go. Could have made some decent money If I had…

Liquid
Admin
06/29/2012 1:01 am

I’ll remind you to invest in Potash Corp next time it drops down to $40 again ;).

thestarvingartistcanada
07/31/2012 10:30 am

I’ve used “COW” for some short term profits. It’s one of the ones I can trade commission-free with Scotia iTrade. It does have some potash in it, but it’s a nicely broad basket of the ag market.

A lot of people I respect thing it’s a good time to buy POT, or at least buy on pullbacks (like TODAY!)

It’s got a nice history of predictable seasonality to it too. Make sure to sell in the end of Dec or at the latest the FIRST week of January.

Liquid
Admin
07/31/2012 10:02 pm

I’ve been seeing so many Scotia iTrade commercials lately lol. Yeah I don’t plan to hold this stock until next year.

TheMadInvestor
TheMadInvestor
02/28/2014 8:31 am

Buddy, your capital in POT is permanently impaired – it would be fair to count that against your gains as opposed to holding it.

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[…] 26th,  2012 I bought 45 shares of POT on the Toronto Stock Exchange. The earnings of the company looked good, and the dividend was […]