The Commodities (Ka)Boom

04 July 2008

Have you ever heard of Potash Corporation?Potash
The ticker symbol is POT on the New York Stock Exchange and Toronto Stock Exchange.
Potash Corporation is a fertilizer producer that is just one example of how crazy the commodities market has become.  Potash’s stock price is up 1495% over the past 5 years.  To put that into perspective, the market capitalization of Potash Corporation is currently higher than that of the Royal Bank of Canada.

Some may compare this commodities boom to the technology bubble that was created in the late 1990’s and early 2000’s.  But is it the same?

A population explosion among the middle class throughout the developing world along with continued infrastructure growth in developing countries is legitimately fueling demand for these commodities.

During the go-go days of the technology bubble, companies had difficulty justifying their valuations.  There was very little concrete data available that could validate the lofty valuations of companies that were low on revenue and high on dreams.  That’s not exactly the case in the commodities game these days.  Like Potash, many companies are spinning off tons of free cash flow and the growth data is there.

From an IR perspective, it is critical for commodities driven companies to provide data, and help interpret data, that justifies their relatively high stock prices.

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