The Mosaic Company

As I've linked Teva with Under Armour, so am I linking the Mosaic Company with Red Hat.  After selling part of my Red Hat holdings in an attempt to diversify, I purchased Mosaic at a little over 50, or at about the same price that I sold Red Hat.  Since that time, RHT has dropped only slightly to 48 but Mosaic has gone to 54 so again, so far, so good.

Mosaic has been on my radar for close to a year and I've been tracking it since it was near $80.  Formed in 2004 as a merger between IMC Global and Cargil's crop nutrition division, I originally started watching Mosaic because of its spin-off with Cargil.  As a spin-off, anyone holding Cargil automatically picked up shares of Mosaic.  As a large cap company, Cargil is of course held by a number of large cap funds.  Mosaic, however, is not a large cap stock.  Therefore, all the large cap funds that held Cargil would be forced to sell their non-large cap stock Mosaic eventually.  This situation appears then to be a classic overlay as the price would necessarily have to go down as more shares hit the market regardless of the companies true value.  This fact was pointed out in an article I read last May as evidently despite spinning off in 2004, May 2011 was when the Cargil distribution was agreed upon.  This situation and a way to profit off it seemed clever, so I put Mosaic on my watch list.  Coupled with the fact that its an agri-business and thus in my wheelhouse made this a natural fit for me.  Since I liked the stock at $80, I obviously love the stock at $50 and my long term tracking will hopefully continue to pay off.

Basically, Mosaic is about the most boring company one could conceive.  It produces nutrients for crop fertilizer.  These two nutrients are potash and phosphate, and as the second largest crop nutrient company, it is the largest producer of phosphate and the second largest producer of potash.  As its inception was 2004, there is not much history to write about, but I look forward to a good solid holding with room for reasonable growth while hedging my bets on Red Hat.

In some aside news, Under Armour was at $84 today passing its $82 mark that I sold half my stake at.  However with Teva at $45 (X2 for comparison with UA making it $90) I am still ahead on that. In Crocodile Gold news, the board did agree to allow 70% of its stake to be sold at a 0.62.  However, I missed the deadline, so I assume that I own part of the remaining 30% although at the non-premium 0.55 per share.

Teva

This Israeli pharmaceutical company, specializing in generic drugs, has been on my radar for quite awhile.  Teva allows me to diversify into an area I do not currently own, has good numbers, had dipped below its normal trading rate (when I purchased it), and  carries a Motley Fool 5 star rating.  This purchase was also a direct response to trying to diversify away from my two largest holdings, Red Hat and Under Armor.  As the purchase price of Teva was roughly 1/2 of what I sold some of my Under Armor, I plan to follow this in conjunction with UA to see how good or bad my choice was.  I sold UA at $82 and it is currently at $77 (still a strong long term holding - look around, you see the logo EVERYWHERE) whereas I bought Teva at $40 and it's at about $46 so so far so good.

Teva, originally Salomon, Levin, and Elstein Ltd. started in Jerusalem in 1901 as a distributor of medications.  During the Nazi rise in the 30's, drug imports from Germany dried up so the three founders of Teva, recognizing this market vacuum bought land and started a drug factory.  During World War II, imports in general stopped, so the local companies supplied all the pharmaceuticals for the local market.  During this time, Salomon, Levin, and Elstein (SLE) became one of the first companies to offer a public offering and be listed on the Tel Aviv stock exchange.  When the war ended they were positioned to expand into global markets.  In order to fully compete, many of the small local factories including SLE merged forming  Teva, so-called for the Hebrew word for Nature. Through further acquisitions including multiple manufacturing plants, they were able to separate their penicillin and non-penicillin making plants.  Evidently, this is important for health regulators and authorities and allowed Teva to enter the US market.  Throughout the 80s they continued to expand, buying manufacturing plants, medical device companies, etc.  They have continued to expand and became the largest generic drug manufacturer in the world in addition to one of the top 15 pharmaceutical companies.

Sell High, Buy low

Since looking at my portfolio in aggregate and making some mental decisions, I have fortunately pulled the trigger on part of my plan.  After the week of November 14 in which we saw huge gains in the market and the Dow hitting in the mid 12,000, I dumped some of my Red Hat and (sigh) half my Under Armour.  My timing was extremely fortuitous as both stocks were near 52 week highs.  Since that time, Italy's debt has bubbled to the forefront and unlike Greece, which could be bailed out, the back and forth on will it or will it not be saved will not occur with Italy.  The market, of course, fell the much ballyhooed greatest amount for any Thanksgiving week since 1932.  So now I have cash on hand and, after ping ponging back to its cyclical low of 11,100, dare I pull the trigger on Mosaic and Teva?  The issue is do I think that "solutions" to Italy's problems will pop up sending the market up, or is Italy and the European union a lost cause and were heading for a Lehman like fall?

Well, I did pull the trigger near the lows, and diversified by taking my $52 Red Hat money and buying Mosaic, and my $82 Under Armour money and buying Teva.  Since that time, Red Hat has falled to about $43 and Under Armour has fallen to $75 whereas Mosaic is up to $55 and Teva up to $43.  So my diversification plan worked so far.  I will point out, I still love Under Armour as a long term hold, and if it falls below $70, I would try to accumulate more of it.

With the leftover money, I increased my Brigus Gold holding.  That has since fallen.  Mining stocks took a bath in 2011, and I was mildly exposed.  Although Northgate went way up when it was purchased, Brigus and Crocodile have fallen.  Indeed, Crocodile has recently been the target of a major stock purchase by a holding company.  They want 85% of the stock and are sadly offering less that what I payed.  So, either I hold Crocodile and hope they don't get taken and keep that with Brigus as my undervalued mining stocks while dumping Aurico (the company that bought Northgate) and purchasing another mining stock (maybe silver).  Or, I accept Crocodile gets bought, I lose on that high/risk high reward investment, and look for another mining stock.  My long term goal is 3 stocks totaling 12% of my portfolio.  In the meantime, I really like Brigus and look for strong gains this year.

Back to the Beginning

Now that I've at least gone over each company that I owned at the time, it is now time to work on re-balancing this portfolio while simultaneously updating on the companies I've bought since I started.  Looking below we see a very unbalanced portfolio.

The observant reader will notice that Red Hat is still at a lofty 28% plus despite the fact that I claimed I had divested due to this overly high number.  Well, I did in fact divest, but Red Hat is hitting new highs and the percentage has risen back to my original 28%.  The irony of course is that had I not divested, I'd have significantly more assets, but, nevertheless, I probably need to divest again. 

In addition to RHT, based from a pure analytical standpoint, I should also divest of MITK.  However, MITK is still very much on the rise long term with huge upside potential, so I may put off for a little.  Also, anything over 8% is in my opinion getting a bit high.  As much as I love Under Armour, it too is hitting recent highs and fluctuates between the high 60's and low 80's, so I may take advantage of its recent highs to sell half my stake.  If it drops down to $66 or so, consistent with its price after debt issues in Europe crop up, I would consider re-investing.  I still like UA for the long term as it's on the up, but it may be getting a little ahead of itself.

On the flip side, a bunch of 1% holdings hold little value.  Even if they skyrocket, like MITK did, going from 1 to 10% is not as impressive as going from 4 to 40%.  I'm looking at a strategy of dumping Dryships, a company which depends on a strong world economy, and racking up Brigus Gold.  My play on Northgate Mining payed off when it was purchased by AuRico Gold, but now I own AuRico gold and not the company I wanted - Northgate.  I'll hold off the verdict on AuRico but I may dump that.  I'd also like to continue my high risk/ high reward play on SORL by increasing my holdings there. 

So, as part of a short term re-balancing strategy, I should trim RHT and UA, dump DRYS and maybe later AUQ.  I addition to increasing BRD and SORL, I am looking to start positions on Mosaic and Israeli generic pharmaceutical company TEVA.

Sirius XM Radio - 0.5%

At this point, the percentages and holdings I own have changed quite a bit since I started. For example, Mitek has catapulted to second place due to its meteoric rise and passed Walter Energy as my secodn largest holding due to Walter's recent loss.  I also divested a bit of Red Hat (at $45) after seeing how much it weighted my portfolio.  I've sold Continucare and bought Gold mining companies, Northgate Mining (NXG), Brigate Gold (BRD) and Crocodile Mining (an over-the-counter, high risk high reward stock).  I've unsuccessfully piggybacked of the Aurex fund with Rubicon Technologies, and bought James River Coal Company right before it was downgraded.  Now, it's time to look at one of my worst buys of all time, Sirius XM radio.

When I bought Sirius XM, they were Sirius and XM separately.  I believed that Satellite radio would be as common as cable TV so I first loaded up on Sirius because it was "cheaper".  However I learned that because there were actually more available shares of Sirius, XM radio was actually cheaper, so, also to hedge my bets, I loaded up on XM.  I watched as both companies bled money competing with each other, prayed for the merger that eventually happened, watched it almost get delisted as it traded lower than $1 for awhile, and watched it return from the dead to pass $2.00.  Now, Sirius XM has a special role in my portfolio: every time I make money from selling some stock, I unload some Sirius to balance the capital tax gains with capital losses.  Needles to say, as much I and my family enjoy their product (especially Running with MJD for me, the Lithium channel for my wife), I don't think that satellite radio will be as common as cable TV.

Sirius XM radio is of course the culmination of a merger between Sirius Satellite radio and XM satellite radio,  Sirius radio was launched in 2002, although founded in 1990 as Satellite Cd Radio Inc. In 1999 the name was changed to Sirius.  As the pioneer in satellite radio, almost all of the early days consisted of simply building the infrastructure, including petitioning the FCC to allow them to broadcast (free of their regulations) and launching their sattelites (3 of them) and building their network.   The launching of Sirius radio was truly a remarkable acheivement given that no one had ever done anything like it before, so the bet was on something totally unproven.

XM radio followed Sirius, perhaps ingeniously letting them pave the way.  XM radio has its origins in the American mobile Satellite Corp (AMSC).  After Sirius successfully petitioned the government to auction off digital licenses in 1992, a spin-off of AMSC (the American Radio Satellite Corporation) successfully obtained the other  license in 1997.  In 1999 the company went public after joining a partnership with GM and Direc TV.  After launching services in 2001, XM spent the rest of the decade competing with Sirius until their eventual merger in 2008.  The subscriber base has increased an order of magnitude over the last decade.  Although the product is solid and reasonably priced, I find their market share may be taken by other entities that stream via the internet.  On the other hand, most of the up front overhead costs appear to be out of the way, so it seems as if they should be able to operate with stronger margins.

Wells Fargo - 2%

Although I have yet to finish going through everything I owned (at the point of starting this blog), I would be remiss if I did not comment on the ridiculousness of the last couple of weeks.  After the dust cleared, I find myself down about 9%.  Now, during the last "crisis", I accumulated as much as I could.  After dropping over 1000 points in recent days due to, among other thing, the "Obama" downgrade (pissing 5 trillion dollars of borrowed money down the toilet while simultaneously killing any chance of growth is responsible more than anything for our country's first downgrade in its history).  I know, part of that 5 trillion dollars of borrowed money was a down payment on our transformation to the "Green Economy" - and notice all the "Green Stocks" I own, making money hand over foot on wind farms - and the rest was spent on an ingenious plan to maintain the "Permament Democratic Majority", or, in other words, buy votes in swing districts.  However, a lot of that loss is due to the very real sovereign debt problem of Europe, although, rest assured, a famous Nobel prize winning economist assures us the social democracy of Europe is running like a charm (they just give those things away to any brain dead moron, don't they).

Anyway, I digress ... with the very real sovereign debt problems in Europe slowing down any global economic expansion, Financials and Energy stocks took big big hits.  Since one should "Buy low", looking for long positions in financials and energy may be advised.  Now, in my opinion, you need to be real long in financials to make that a buy as its going to get a whole lot worse before it gets better, but energy stocks might be the way to go.  My own holding of Walter took it hugely on the chin making me regret the stop order I canceled, but even Walter has gone back up over 7% since its precipitous drop 2 weeks ago.  One thing I did NOT do was "sell to stop the bleeding".   One thing to be noted though, is that our anemic 0.4% growth last quarter contributed to the big recent losses.  Predicting these slow quartesr (or dare I say it, contractions) beforehand may be a signal to sell, then jump back in after the dust clears.

Now, back to our regularly scheduled program and the next stock I own in the wild and wooly world of ... Financials.  I do own Wells Fargo and feel extremely fortunate that I dumped my Bank of America and Citibank months ago (BAC at $13 - it now trades near  $6 and C at $40, it now trades near $25).  I traded in those dogs for this one for one fairly simple reason ... piggyback investing!  There is no shame in piggyback investing and in the last two years I have hitched my horse to the Oracle of Omaha himself, Warren Buffet with, excepting this one, very good success.  In the last 2 years I've bought and sold with Mr. Buffet, CarMax, NRG, and Nalco.  With NRG, I learned two valuable lessons.  First, NRG skyrocketed when Exelon wanted to buy them out.  NRG resisted believing they were worth even more than their offer.  I trusted that assessment and watched the buyout fail and the stock plummet.  Lesson learned, a buyout offer comes, sell when the stock price is inflated (see Continucare).  Next lesson, Warren Buffet sold his NRG stock and again, looking at under 10 P/E ratios, I held.  The stock fell.  When WB dumped Nalco, I dumped it the next day, despite my fondness for it.  These days, WB bought up tons of Wells Fargo, until it made up 20% of his portfolio.  Wells Fargo is currently the only piggyback stock I own of Mr. Buffets as I believe he has recently lost it, becoming way to emotionally invested in his buddy Big O and clinging to the belief that he won't continue to be a failure.  I also like John Paulsen for piggyback investing and recently started looking into the Auerx fund picks for future piggyback investing.  For now, I'll stick long, really long with Wells Fargo.

Archer Daniels Midland - 2.2%

Archer Daniels Midland (ADM) is one of the largest agricultural companies in the world.  As a strong proponent of investing in company's that profit off things with intrinsic value, I believe ADM or other such agribusinesses should be a part of everyone's portfolio.  At $30 a share and trading at multiples of under 10, I consider ADM a buy and accumulate. Having not missed paying a dividend in decades also works in ADMs favor.  In fact, ADM is down recently, probably, I'm guessing, from the recent calls to end ethanol subsidies.  I for one (in addition to being against the ethanol subsidies, despite my stake in it) believe this is a very short term issue and ADM, with their vast ability to diversify, will be back up soon enough.  Of course, being located in the second worst state for doing business (Illinois) may not help either with short term outlooks, especially with class warfare rhetoric from their current Governor.  Indeed, it looks as if tax increases were responsible for ADM missing their most recent quarterly profit expectations.

You may have heard of ADM thanks to the recent Matt Damon movie "The Informant" and their price fixing scandal in the early 90's.  I'm fairly confidant that those price fixing days are behind them. 

ADM is another stock I've nearly doubled my stake off of as one of the "blue chips" I purchased during the height of the Lehman Brother's, "The sky is falling, the sky is falling", stock market "crash".  This one was chosen by my wife after reading "The Omnivores Dilemma".  I don't know what you got out of that book, but my wife got "Buy Archer Daniels Midland!" out of it.

Archer Daniels Midland started in 1902 as Archer-Daniels, a linseed crushing company based out of Minnesota.  With the acquisition of the Midland Linseed Product company, Archer Daniels Midland was first incorporated and, dare I say it, born.  Systematically and deliberately growing and expanding into many agribusiness facets, ADM has systematically added such agriproducts as soybeans, corn, and cocoa to its agri-portfolio, and now is the premier company for linking the farmers raw products to the consumer.  Along with RIG, ADM is another stock I may accumulate more of, especially at $30.  However, I also like Mosaic (MOS) as an alternative to one's agribusiness portion of their portfolio.