Not only do I rest my case, but this is a perfect example of how the UN-level playing field takes the small investors/traders for a ride. I'd be shocked to think Loeb and others didn't know about this potential 25% drop in fertilizer prices before the fact. I'm sure he sold most of his position yesterday, which we won't know about until months from now.
They took a stake because they think it's severely undervalued & that the value will be realized. Cf thinks this as well, which is why they bought their own shares at $197. When a company takes on a project or buys back its shares, such actions must exceed the company's hurdle rate. I worked for a bank some years ago, which had a hurdle rate of 15% . A company in CF's industry would likely have a higher hurdle rate. However, even at 15% CF would be revealing that externally the shares should be $226.
Here's why Third Point bought shares, if you're short you'll probably lose it all:
- "CF currently trades at an unwarranted discount to fertilizer and commodity chemical peers. We believe its structural cash flow generation strength is misunderstood and that management should deliver a much larger dividend to its shareholders. Such a dividend would highlight the sustainability of its cash flow generation and lead to a substantial re-rating."
- "CF has been underperforming recently despite the emergence of several positive indicators, including reduced Chinese plant operating rates, reports of capacity idling in Eastern Europe, and the shelving of two plant expansions in North America. This underperformance reinforces our view that a dividend strategy based on CF's stable cash flow stream would lead investors to reassess the company's valuation."
Variation, I think you're missing my point. I'm a short term swing trader. Today was a short covering rally, as it caught the shorts by surprise. What Loeb and the market did today was to create a self-fulfilling prophecy. There's no way a stock trades up 12% or $21 in a surprise short rally, without digesting the gains at the very least.
So I went short just before the close. Can I go under water in the am for still further gains? Of course, and in that case I'll add to my short. Will I hang around 6 months to see the fundamentals improve, the dollar get pummeled, and the AG's trade way up? Not at all.
So I see your point, and Loeb's point....but at the end of the day, the street decides what to do next. I'm betting CF retreats to about $195 before heading to $210, and if that happens, I make a profit. If I'm wrong, I'm wrong and I move on. Short term gains are the norm in this market. GLTY....