Potash is the “New” Google

Potash Corporation (POT) has seen its share price triple in 2007. The stock is near a record high. Founded in Canada in 1953, they make…fertilizers.

Fertlizers and anything agriculture are hot, hot, hot.

But is the stock? There is a healthy debate on the Yahoo Message Boards about whether or not you should be buying it at these levels. Said one poster:

POT is a leader in a hot sector - Agriculture/Fertilizers. The market still expects further price increases in potash, so EPS will move up, and over the next few years POT will be increasing output by 50%. EPS for 2009 may be $8 to $9, but p/e could return to 15-18 or even lower once the market thinks that the commodity price has peaked.

Everyone talks about the increasing population and changing diets as the cause for increasing Potash demand. The only reason for the present tight supply of fertilizers is biofuels. If ethanol use as fuel was discontined, POT’s stock price would fall by 75%.

The U.S. government is beginning to realize the potential impact of biofuels on food inflation, and there will be increased ethanol production from sources other than corn. Also, if oil falls to $60 - $70 as I think it will, that may reduce the demand for ethanol as a fuel, which would pressure fertilizer stocks.

With the exuberance in Google’s stock seeming to have peaked (for now), maybe it’s a contrarian play to stay away from agricultural commodities and buy some of the Tech Titans?

A good question to ask: do you even know what potash is? If not- think before you leap into buying the stock.