Point72 Asset Management, L.P. is a family office managing the assets of its founder, Steven Cohen (Trades, Portfolio), and eligible employees. He is a billionaire hedge fund investor and the founder of SAC Capital Advisors. Cohen grew up in Great Neck, New York, and he attended the Wharton School of Business at the University of Pennsylvania.
Last quarter, the firm initiated position in Potash Corp. (POT, Financial) buying 899,400 shares. Potash Corporation is the world’s largest fertilizer company by capacity producing the three primary crop nutrients: potash, nitrogen and phosphate. Potash Corp.'s stock looks attractive from a medium-term perspective. The company is benefiting from strength in global potash demand, and its EPS is expected to increase 3.8% in the current year and 13.2% in FY2016. However, the real inflection point will come in 2017 when the company's low-cost Rocanville and Picadilly operations enter production.
According to UBS analyst Brian MacArthur:
“Potash Corp is positioned to benefit from a significant ramp-up of low cost production through 2017 as its new Rocanville and Picadilly operations enter production. The current expansion at Rocanville and ramp-up at Picadilly will increase Potash Corp’s production capacity by nearly 4Mts and should contribute to materially lower costs. In addition, as these mines ramp-up through 2017 capex will decline and free cash flow should increase."
The company's potential to increase revenues and earnings from new production facilities, coupled with declining expansion spending, bode well for its free cash flow profile and the company can return excess cash to shareholders through buybacks and dividends. Potash Corp is trading at a forward P/E of 15.40 and has a forward dividend yield of 4.70%. According to Gurufocus DCF calculator, the company has a business predictability rating of 3.5 star and offers margin of safety of 32%.
The company's low valuation, high dividend yield and improving fundamentals makes me bullish on the stock.
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