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weiwentg (98.30)

Thoughts on Compass Minerals

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January 02, 2010 – Comments (7) | RELATED TICKERS: CMP

Compass Minerals has been quite good to me. I bought a small stake in the upper $30s. In mid 2008, the stock got caught up in the potash mania and hit $80. I sold about half my shares. It then tanked to under $50 (and under $40 some times). Now, it's hit nearly $70.

Compass' primary business is salt. Its salt mine in Goderich, Ontario, is perfectly positioned to serve the Midwest because of proximity. Due to weight, it's more expensive to ship salt in from elsewhere. Compass' secondary fertilizer business cannot help but rebound at some point. I think there will be a secular rise in fertilizer demand due to increasing living standards around the globe. However, if fertilizer prices return to their previous levels, then I think Compass is about fairly valued right now.

Overall, this is one of my favorite companies. Morningstar considers it a buy under $60.

http://news.morningstar.com/articlenet/article.aspx?id=320505#page=0&part=2

7 Comments – Post Your Own

#1) On January 02, 2010 at 7:44 PM, alexxlea (34.71) wrote:

Question: Why do few people have stops, trailing stops, etc? You seriously let stocks ride down 50%? The only reason why you would not have a stop of some sort hit before some insane number like 50, 40, 30, 20% of your wealth is that you believed that your ability to pick a reentry point would be so insanely bad that you would enter the position at a higher price than you sold at, or would not reenter the position at all.

 

And in my opinion, if you cannot do that, you shouldn't even be in the market. Just my personal opinions. 

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#2) On January 02, 2010 at 7:45 PM, alexxlea (34.71) wrote:

And don't ask about my terrible caps score I just picked positions over a year ago and never touched them, caps is a waste of my time.

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#3) On January 02, 2010 at 7:45 PM, alexxlea (34.71) wrote:

Picked positions at random.

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#4) On January 02, 2010 at 8:00 PM, catoismymotor (60.25) wrote:

84.18 is not a terrible score. For being hands off for a whole year that is not too bad.

I like CMP as well. I have it on my watch list.

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#5) On January 02, 2010 at 8:02 PM, goalie37 (96.88) wrote:

I like Compass as well, but don't know the stock well enough to pick a fair value for it.  If you say it is at fair value, then any downside would seem like a good time to buy some more.

What I like about them is that they are so boring.  The road salt industry is one that will probably look the same 10 and 20 years from now.  That kind of visibility is rare.

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#6) On January 02, 2010 at 10:32 PM, truthisntstupid (95.55) wrote:

What a moat.  Compass Minerals owns two of the largest salt mines in the nation and can mine it and ship it more cheaply than its competitors.  Uhhh...what competitors?  Almost all of the salt on the continent is mined by only three competitors.  The only thing that slows them down is the weather some years.

Its mines are irreplaceable assets.  They have a five-year dividend growth rate of just short of ten percent and a payout ratio of only 26%.   If you're looking for a dividend you can count on both to be there and to grow, with both a low payout ratio and a killer moat for your margin of safety, it doesn't get much better than this.  I use only direct stock purchase plans and prefer a little larger yield because, being older, I don't have the time to wait.  This is a good buy-and-hold dividend investment for younger people, with a dividend that's virtually guaranteed safe and expecting your yield on cost to easily about double every seven years or so makes you anything but stupid.  

If some people can't understand that, maybe they shouldn't be in the market.

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#7) On January 03, 2010 at 5:36 PM, weiwentg (98.30) wrote:

I don't believe in trailing stops because I consider technical analysis to be speculation. If a stock drops 50%, then it's time to re-evaluate based on the fundamentals. With Bank of America,  my second-biggest mistake of 2008/9, the fundamentals changed thanks to Ken Lewis buying Merrill. With AIG, my biggest mistake of the season, I was seriously wrong on the fundamentals to begin with.

With Compass, the fundamentals had not changed - their stable salt business was their main line of business and their secondary potash business was not permanently impaired. That's why I bought more.

 To clarify, I think the firm is slightly undervalued at present. I'm holding my stash, but might sell a few shares above $75. If we see a longer-term impairment in potash pricing, then I would trim the stock at about today's price.

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