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   Non-TechUAN - The variable distribution MLP that could go a long way


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To: Area51 who wrote (214)9/30/2021 4:34:56 PM
From: Paul Senior
1 Recommendation   of 353
 
The comments to Elroy's UAN posts on other threads both dismay and confuse me.

I understand that businesses at all times have negatives or risks that might impinge on stock prices. It just seems to me the positives are so overwhelming and certain -- as certain as can be, presuming no catastrophe at one of the plants or some unknown/unexpected government intervention occurring or something else - that that certainty will manifest itself in large upcoming distributions and a most likely rise in the stock price. Maybe not to the $hundreds, but up from $70. (But maybe greater than $hundred too if history repeats.) Maybe nothing's certain in the stock market. But the probability here has got to be high here, like maybe .95.

Why are not more people persuaded? Elroy makes the case for UAN excellently. Do all those people who're reading the posts and those who comment about UAN have something better? Surely there are some who, when the money would seem to be right in front of them, would overlook their concerns that it's an MLP (if that were a concern.). And no one has said, hey dump everything you own into this great opportunity. Why aren't there more people -- people who temper their risk by position sizing -- acknowledging that UAN might be very suitable for even a small investment? As I say, this lack of interest dismays and confuses me.

Oh well, I'm still a believer and still holding on.

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To: Paul Senior who wrote (216)9/30/2021 4:40:49 PM
From: Elroy
   of 353
 
Do all those people who're reading the posts and those who comment about UAN have something better?

This is the part I don't understand. Every stock has it's risks, but UAN seems extremely attractive now. Usually when friends ask me about which stocks to buy I don't have any EXCELLENT ideas, but this one is about as good a pick as I've seen in my investment lifetime.

If they don't like the UAN story right now, what DO they like?

Something amazingly unexpected like "one of the plants exploded last month" would have to happen to make it not work out.......

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From: Elroy9/30/2021 4:51:10 PM
   of 353
 
Crikey! UAN above $460/ton for Q1 2022 delivery now.....

cmegroup.com

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To: Elroy who wrote (217)9/30/2021 5:44:40 PM
From: Paul Senior
   of 353
 
At first - when UAN was first mentioned by you and the stock was much lower and before the debt reduction and distribution announcement - I figured it was the $10 bill-on-the-sidewalk analogy. (Two guys walking on the sidewalk. One guy says there's a $10 bill on the curb. Other guy says oh, it can't be. Somebody would've already picked it up already. First guy goes over an picks up the bill.) Maybe after the dividend distribution people who looked figured it was too late - the stock price was already up. But "too late" -- wouldn't that be an incorrect response, because if they actually figured it, looked at it, it doesn't seem to be late at all - at that time or now at $70.

To me, it doesn't have to be the best opportunity available. "The best" is arguable. For me, it just has to be good enough. And this is much better than good enough. I just do not understand how more people are not positive on this stock, and apparently are just very indifferent to it.

Perhaps we here and those on the UAN Yahoo thread have got it wrong, and we will be sorry we believed in UAN so strongly. Doesn't appear that way, and so far, we seem to be doing ok. Maybe better than ok. (That's stock buyers--I've no idea regarding options players.)

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To: Paul Senior who wrote (219)9/30/2021 11:18:45 PM
From: Lesser_Ape
   of 353
 
Well, you can add me to the "one of the best opportunities I've ever seen" crowd.

I think one issue is that commodities are so different from the tech stocks that have been working so well in the last few years. Plus, everyone knows that commodities are cyclical and prices will eventually come down, so they look at the stock and assume that it's already at the top of the cycle. And they don't want to be the bag holder.

I did find the movement in the forestry stocks (e.g. Interfor and Resolute) interesting. Lumber peaked in May and then plummeted, giving up most of the gains in a couple months. The stocks fell as well, but have recently bounced. Interfor, which had highs in the $37 range, fell to $23 in August, but has been trading in the low $30s range recently, though there hasn't been much of a bounce for lumber.

Stelco, in steel, is somewhat similar. At the first whiff of a correction, it has fallen from $50 to the $37 range. But steel hasn't fallen much at all.

One of my speculations is that people are trying really hard not to be the bag holder in these commodity stocks. So, they're basically only increasing the valuation for the shares as money actually gets added to the balance sheet. There's no credit given for future earnings.

And then, when the underlying commodity falls even a tiny bit, the shares get beat up. But because investors have been so conservative in trying to avoid being bag holders, a correction in the underlying commodity is actually already priced in. So the shares look cheap even with the lower commodity prices, which causes them to be bought again.

So for UAN, I think we're basically in the phase where people see it's gone up, assume they've missed most of the move, and are too frightened to invest because they're worried about being the bag holder when the cycle turns.

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To: Lesser_Ape who wrote (220)9/30/2021 11:37:16 PM
From: Elroy
   of 353
 
for UAN, I think we're basically in the phase where people see it's gone up, assume they've missed most of the move, and are too frightened to invest

It's hard to explain why others are making the decisions that they are making.

I look at the 2011-13 previous peak of the fertilizer cycle, see that UAN paid about $20 per year for those three years, realize that today UAN is a larger producer of fertilizer than it was in those three years, see that UAN's unit price was $200-$280 during those three years, and think to myself "$70 is cheap!".

But yeah, I generally invest in tech stocks. I have followed UAN for 6-7 years, which makes me perhaps the resident expert on SI, but I don't know much about fertilizer and commodities beyond what I post on these boards. It SEEMS like this may be a multi-year strong cycle, and UAN MAY distribute more than $20 for a few years, and therefore the UAN unit price MAY go back above $200 in 1-2 years time (when investors see the distribution possibility of UAN, and length of this fertilizer up cycle), but.....who knows?

However, every tech stock has it's own "who knows"? possible disappointing future developments. All of them do. Why is UAN's who knows? so much more concerning than Intel's or some bank's or any other stock.

My hunch is longs are going to be pretty happy a year from now, with $20 cash in our pocket and a unit price above $100. And then it will depend on what's the outlook for fertilizer price in the 2023 planting season, which is beyond my ability to forecast. But....things look pretty good from what I can see.

$70 isn't that high. They did a 1 for 10 reverse, so it's only $7 off the previous share count. When UAN distributed ZERO for six years it was about $3, and when it distributed a lot ($2.00 per year split adjusted) it was about $22. Now we're at $7.00, heading into the high distribution period.

It seems to me it gets no credit for the positive company specific and industry outlook. Will it get credit once the positive outlook materializes is the question? Even if it doesn't, we will get the big distributions.

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From: Elroy9/30/2021 11:43:12 PM
   of 353
 
Producers Face Fertilizer Price Squeeze
China Phosphate Fertilizer Export Freeze Adds to Global Supply Challenges


https://www.dtnpf.com/agriculture/web/ag/crops/article/2021/09/30/china-phosphate-fertilizer-export


The move by China earlier this week to ban phosphate exports until at least June of next year puts even more pressure on global phosphate trade. The U.S. doesn't buy much phosphate from China, but the country represents about 30% of world trade. Now China's traditional buyers will be looking elsewhere.

"And it just continues around the world as everyone goes other places to buy, and then they run out," said Josh Linville, director of fertilizer for StoneX. "The ripple effect is that the entire world trade balance goes down, and there's just not enough out there to go around."

The ripple effect won't be positive for growers, said Samuel Taylor, a farm inputs analyst for Rabobank. "You are likely to see pressure on urea, and the MAP and DAP, in particular. Those are the pricing products that were kind of really concerning."

Nitrogen fertilizers such as urea ammonium nitrate (UAN) has gone up 78% from a year ago while potash is 85% higher.

CF Industries argues both Trinidad and Tobago, and Russia, are heavily subsidizing UAN exports. The U.S. International Trade Commission voted in August to continue pursuing that petition, which could lead to countervailing duties on UAN from those countries early next year.

Talking to customers, Taylor said liquid 32, derived from UAN, is now one of the products most scarce on the market right now. "So there are concerns that policy has impacted the availability of UAN in the North American market at present as well," he said.

--------------

There are loads of articles like this in the press. And yet, the unit price of UAN (which makes UAN, the fertilizer that is in short short supply) isn't up much. Frustrating, but lets see what happens as the numbers roll out over the next few quarters.

If UAN pays $4 in Q3, $5 in Q4 and $7 or more for Q3, well....someone's gotta notice!

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From: Elroy10/1/2021 11:58:01 AM
   of 353
 
Here's something that seems interesting to me. Evidently today JPMorgan is out with a bullish equity research report on big fertilizer maker CF. Also, there has been an Indian tender for Urea fertilizer with super high prices, showing the world (again) that fertilizer prices are really high, and fertilizer companies will likely benefit.

CF is up 7%.
MOS and NTR (also big fertilizer makers) are up ~4%-5%.

LXU is a small fertilizer maker, comparable to UAN, and it's up 8%.

UAN - on this great day for fertilizer stocks - is up only 2%.
It surprises me, because I think UAN is the best investment of them all. It is an MLP, so when it makes its profits, rather than pay taxes on upcoming profits and then collect the cash and put it on it's balance sheet for future useage, UAN MUST distribute the excess cash to us unit holders. We pay taxes on it. and we decide what to do with OUR cash.

We get the benefit of the upcoming bullish cycle in fertilizer, UAN doesn't keep it from us like a C-Corp. would do.

Although the world know this (that UAN is going to be a cash distributing MLP monster), somehow the investment world doesn't appreciate this upcoming cash flow as much as it appreciates the cash retention trends of the publicly traded C-Corp fertilizer stocks.

It will be interesting to see if the units appreciate meaningfully after UAN has declared four quarters of big distributions (Q3 2021 through Q2 2022). If the units are meaningfully higher a year from now, it tells me the market is NOT a good forecaster all of the time, because it's obvious that the distributions are coming, and the market sees the trend in the share price appreciation of the C-Corp's, but less so in the MLP UAN.

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From: Elroy10/1/2021 3:57:09 PM
1 Recommendation   of 353
 
Well......it's about time!

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To: Elroy who wrote (218)10/1/2021 5:28:34 PM
From: Elroy
   of 353
 
UAN for Q1 is $472/ton now.....

cmegroup.com

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