Quick Thoughts on Nutrien, GameStop and SuperValue

There’s a lot of action on some of our stocks. Here’s a first update. A lot more coming as I am healthy and very socially moderated right now:-) 

Nutrien

As mentioned before, the merger of Potash and Agrium created a powerhouse in fertilizer called Nutrien (NTR). Not only will this company have a lot of control of pricing, but also distribution of fertilizer. 

As global warming, water issues and depleting arable land become bigger problems, and fertilizer becomes more expensive due to a lack of capital investment and rising energy prices short-term, fertilizer prices will rise. We are set to see a big boost for companies like Nutrien. 

I know some like Mosaic (MOS), but I don’t see it anymore. They’ll need to merge with somebody, maybe Intrepid Potash (IPI). A merger like that would be a boost to current Intrepid shareholders (spec buy I think I’ll be adding to VSL).

The merged Nutrien should come close to or even exceed their anticipated cost synergies of $500 million within 2 years of the merger. I expect a slew of announcements on cost cutting and asset sales soon. 

The asset sales will be of Sociedad Quimica y Minera de Chile (SQM) which could net up to $6 billion, and Isreal Chemicals (ICL). Potash previously converted its equity stake in Sinofert to a passive investment. Agrium already divested Conda, Idaho phosphate facility and mineral rights. 

The company states“Nutrien expects to target a stable and growing dividend that reflects the anticipated strengthened cash flow profile of the combined companies. Subject to market conditions and Nutrien Board approval, we expect to establish a dividend payment similar to the previous Agrium level of dividends, adjusted for the number of Nutrien Shares outstanding.”  

So, we should anticipate a 2-3% dividend to begin with. I saw a 25¢ estimate, I’m not sure if that’s correct, if so, that’s about 1.8% for now. The upcoming dividends are based on the previous company we invested in, so for use, Potash. 

I like the power this company will have in coming years. Other analysts are estimating a range of $50 per share to $68 per share. A buy in the low $50s entails very low risk in my opinion in general and the analysts offer some reassurance. Greg Barnes at TD Securities, a 4 star rated analyst (I’m 5), just reiterated a $65 price target. Charles Neivert, 4.5 stars, at Cowen just reiterated a $60 price target. Remember, those are 12 month targets. I look out 2-4 years.

SuperValue

The short story for the SuperValue (SVU) beat up is the flatness of revenue at the retail locations. The goal of the company though is to continue focusing on wholesale, which it is the biggest in the nation. That is a great goal in a world that will see more grocery delivery in the future and more on time supply of stores. 

A little inflation could really help grocery. I think that is coming. A little inflation, nothing horrible, not yet. That will give SuperValue the ability to sell its retail units eventually. I see a lot of money coming to them, which will wipe out a lot of debt. I expect this company to do very well in coming years. 

For folks without SVU, this is potentially a bottom fishing opportunity. RBC Capital just yesterday reiterated a $34 price target. pivotal Research said $32 a few days ago. Those analysis follow similar ideas that I have posed, i.e. retail grocery asset sales and rise in wholesale needs by grocers and delivery.

I’m in the shares already from about $18, so I’m not adding, however, folks without a position could be buyers. SVU is worth 2% of a portfolio from these prices. I am exploring LEAPs again. 

GameStop

GameStop (GME) is getting beat up because the company has to deal with a slower rollout of Apple products and changes to their comp at AT&T. That means some likely beats later though. I think this is a nibble opportunity for those without the stock. I’m not adding to my position though because its back at about my cost basis, which is a huge support level.

The result is the company is taking some charges. Anybody who didn’t know this is a retrenching company did not pay attention to the article I wrote:

A Fat Dividend And Cloaked Growth At GameStop

These price levels are another opportunity for investors to get involved in GameStop and its dividend, and potential growth. I see this stock in the $30s in the 2-4 year window and there is a chance to triple in the 5-7 year window. Top rated analyst Colin Sebastian at RW Baird just reiterated a 12 month price target of $23.

GME is worth 2% of a portfolio from these prices. Selling cash-secured puts at $18 per share strike price is also viable. 

Disclosure: I am/we are long NTR,SVU,GME.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: I own a Registered Investment Advisor (https://BluemoundAssetManagement.com), however, publish separately from that entity for self-directed investors. Any information, opinions, research or thoughts presented are not specific advice as I do not have full knowledge of your circumstances. All investors ought to take special care to consider risk, as all investments carry the potential for loss. Consulting an investment advisor might be in your best interest before proceeding on any trade or investment.