Swing Trade, Round 5: Buy – Food for Thought

Just bought some shares of the fertilizer company, Potash Corp. I think this is a great opportunity to make some easy money, if I’m lucky. I’ve only used $600 of my own cash for now. It might not sound like much but that’s because I’m going to borrow extra money from the bank and leverage it up to roughly $2000!

Earlier today I bought 45 shares of Potash Corp at $43.74 each.
Initial investment: $600
Leveraged up to $1,978.29

This means I bought almost $2000 worth of stocks for only $600. My bank was nice enough to provide me with the remaining amount I’m short on. That means I owe the bank money, (at 4.25% interest annually) but I believe it’s worth the extra risk.

I’ve always liked this company. They specialize in fertilizers, animal feed, and other chemicals used to produce food. As they say in their advertisements, potash is food for the food we eat :). They also have a great balance sheet and trades at a decent 11 x forward earnings. They are the largest potash producer in the world and a leading phosphate and nitrogen producer. They will continue to be profitable as long as people continue to eat (=^_^=). Why did I buy Potash now? Because over the last year the stock has been falling. But lately it has bounced off a low and is moving up with above average volume. I think they have reached an inflection point.  The short-term technicals for this company is simply too amazing of an opportunity for me to pass up. By the way, Potash Corp is also publicly traded on the NYSE for those interested in the US.

My strategy is simple. I will consider selling this stock when it gets above $48. Or I will buy more of this stock if breaks support and falls below $39, thereby lowering my average cost base and I will sell another day. Since this is a S&P/TSX 60 listed blue-chip company, and is a leader in its industry, I’m not concerned about it going out of business any time soon ;-D