Potash Stock

in Company

Potash stock can be a great investment vehicle. Potash is a limited resource, like oil. It is not a renewable resource. Although it is not as widely known as oil, the fundamental scarcity of potash makes it an interesting choice for a long term investment. Because many factors that contribute to the price of potash are responsive to inflation trends, such as transportation costs, potash stock may have some of the positive aspects of an inflation hedge as companies are able to adjust raw potash prices to keep pace with inflation. Future scarcity may push raw potash prices higher. This could increase the margins of potash companies. Increased margins almost always have a profound effect on a company's stock price.

Potash is one of the most essential nutrients that crops need to produce strong yields. Potassium is critical for protein synthesis in most leafy plants and helps plants grow strong roots. Plants that do not receive enough potassium often exhibit stunted growth. Proper levels of potassium during the growing season will help plants resist diseases. Potassium also plays a role in cold tolerance. Plants that are not absorbing sufficient potassium may succumb to cold weather spells. Potassium deficiency is a serious problem if not addressed early in a plant's life cycle. The price of potash will likely rise over the coming years as the earth's population increases. As an ever greater quantity of food becomes necessary to feed the planet's population, the demand for potash will increase commensurately. Potassium also has a variety of non-agricultural uses. 

The golden rule of buying stocks is that one should buy low and sell high. Potash stock is well below its historic highs. Buying now could be advantageous in the long run. Investors are not likely to experience much downside with an investment in potash stock, especially if they are purchasing the stock with an eye toward holding it over a long term rather than acquiring it only for potential short term upside.

Investors flock to safety when the market becomes uncertain. Highly speculative positions begin to lose their appeal when the market is not trending up. Volatile markets contribute to investor fear. Raw materials and the companies that control them are often considered to be among the safest investments. Investments in such companies is considered much safer than, say, putting money into a mutual fund that holds retail stocks or buying shares in a luxury auto manufacturer. This is because demand for potash and other commodities tends to increase over time, not decrease. The demand for potash is not as linked to consumer fiscal security as companies that depend on disposable income or rely high consumer salaries to sell their goods. People can often delay big ticket and luxury purchases but they still need to eat. Crops still need to reach maturity with high yields. A farmer might put off buying a new tractor for a few years but cannot put off buying the growing season's load of potash. Controlling a commodity with predictable and generally increasing levels of demand offers a company significant resilience in difficult economic times. Potash companies are well positioned to weather economic crises.

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Frank Dempsey has 312 articles online

Discover why potash stock is important to boosting the world's food production, and the reasons why efficient mining options are key.

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This article was published on 2012/05/03