Billionaire D.E. Shaw Bought $27 Million of Potash Corp./Saskatchewan; Should You Buy, Too?

Here’s why the smart money is buying Potash Corp./Saskatchewan (TSX:POT)(NYSE:POT).

| More on:
The Motley Fool

Dave E. Shaw is one of the greatest stock pickers on Earth.

In 1988, he founded D.E. Shaw & Co., LP. Since its inception, the hedge fund has consistently delivered double-digit returns for clients. Today, it’s one of the largest hedge funds in the world, with over $30 billion in assets under management.

This performance has cemented Shaw’s place amongst investing legends like Warren Buffett and George Soros. Because of his remarkable track record, I always pay attention to what stocks Shaw is buying. And right now, he’s making some interesting bets in agriculture.

If you want to get rich, become a farmer

Shaw has been betting big on rising food prices. In recent quarters, he has amassed huge positions in stocks like the Monsanto Company, Agrium Inc., and Mosaic Co. These companies are great ways to play a farming boom.

He’s also building a new position. In August, SEC filings revealed that Shaw had increased the size of his stake in the Potash Corp./Saskatchewan Inc. (TSX: POT)(NYSE: POT). As of June, the billionaire investor owned 714,000 shares valued at about US$27.1 million.

Despite the ongoing advances in agriculture, Mother Nature has her limitations. Nutrient-rich top soil continues to erode. Water tables are being depleted. Global warming is wreaking havoc on production.

Compounding these problems, food demand is on track to grow dramatically over the next few decades. The United Nations predicts that the number of people living on the planet will hit 10 billion by 2040. And with more citizens in emerging countries adding meat to their diets, food demand is growing even faster than population.

Potash Corp. stands to benefit the most from rising food prices. The company is the world’s largest producer of potash, a key ingredient in fertilizer. The economics are simple: Farmers will need to buy ever greater quantities of fertilizer to produce more food on less land.

That said, it hasn’t been a smooth ride for Potash Corp. Potash prices have plunged 20% after the surprise breakup of the Uralkali producer cartel, and that scared a lot of retail investors out of the stock.

However, Wall Street insiders are taking advantage of the pullback to build their positions. Famed investor Jean-Marie Eveillard has accumulated a US$705 million stake in Potash Corp. A number of other respected money managers including Ken Griffin, Ray Dalio, and Israel Englander also initiated or increased the size of their positions last quarter.

While it has been a bumpy ride for Potash Corp., the company’s outlook is starting to brighten. And judging by Mr. Shaw’s other positions, he’s definitely bullish on the agriculture sector. I think it’s wise to follow in his footsteps.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Robert Baillieul has no position in any stocks mentioned. The Motley Fool owns shares of Potash Corp. Agrium is a recommendation of Stock Advisor Canada.

More on Investing

Hour glass and calendar concept for time slipping away for important appointment date, schedule and deadline
Dividend Stocks

This 8% Dividend Stock Pays Cash Every Month

Earn monthly cash of $154 with this 8% dividend stock.

Read more »

A miner down a mine shaft
Metals and Mining Stocks

Should Investors Buy the Correction in Lundin Mining Stock?

Lundin (TSX:LUN) stock has fallen by 10% in the last few weeks, but so has the price of copper. Coincidence?…

Read more »

Metals and Mining Stocks

Best Stocks to Buy in May 2024: TSX Materials Sector

A TSX materials sector ETF could help investors gain cheap diversified exposure to the hot sector's stocks – so will…

Read more »

man is enthralled with a movie in a theater
Investing

Should You Buy Cineplex While it’s Below $9?

With analysts expecting a significant recovery in the second half of 2024, is this the last chance to buy Cineplex…

Read more »

oil tank at night
Dividend Stocks

Think Oil Is Going Higher? 3 Dividend Stocks to Buy Now

Looking for steady dividend growth? These three Canadian oil stocks could provide substantial dividend income in the coming years.

Read more »

Profit dial turned up to maximum
Dividend Stocks

This 7% Dividend Stock on the TSX is Worth Watching

With this superb TSX stock now trading at the bottom of its 52-week range, it's certainly a dividend stock you'll…

Read more »

Dots over the earth connecting the world
Dividend Stocks

1 Magnificent Dividend Stock Down 23% to Buy Right Now Near a Once-in-a-Decade Valuation

Patient investors could be happy with this dividend stock a few years down the road.

Read more »

edit Businessman using calculator next to laptop
Dividend Stocks

2 TSX Dividend Stocks to Buy While They Still Offer Great Yields

These top dividend-growth stocks now offer 7% dividend yields.

Read more »