Mosaic: Back in the Saddle

Fertilizer producer Mosaic (MOS) was my top dog position for much of latter 2007 into early 2008, often sitting at 6-7% of the portfolio. While much of the rest of the market was falling apart after the October 2007 peak, there was a harbor of safety in the commodity space....until there wasn't. After the blowup of commodities that started in mid 2008 - it, along with a host of companies across the commodities spectrum (and indeed the entire market) went into a death spiral. In retrospect, once more the "front page" indicator worked like a charm in this space - no different than most investment crazes. (be wary of the 'rare earth metal' cover story coming soon!) [Apr 30, 2008: Finally (a Year Late) Fertilizer Hits the Front Page of the NYTimes; and an Interview with Mosaic CEO] Much like auto companies/suppliers the fertilizer space has extremely high leverage with a supreme level of fixed costs. So when business goes bad, it tends to go really bad - but when it is good, gross margins balloon, andmuch of the incremental revenue drops straight to the bottom line.

• Mosaic's gross margin for the second quarter of fiscal 2011 was $768.3 million, or 29 percent of net sales, compared with $307.0 million, or 18 percent of net sales, a year ago.

Now appears to be one of those times... the stock is up some 100% in just over 6 months and reported another very nice quarter last evening. I keep saying it, but this feels like deja vu with latter 2007, early 2008 across the commodity space.