We recently compiled a list of the 11 Best Potash Stocks to Buy According to Hedge Funds. In this article, we are going to take a look at where Compass Minerals International, Inc. (NYSE:CMP) stands against other best potash stocks to buy according to hedge funds.
Potash is a group of minerals and chemicals that contain potassium, a vital nutrient for plants and animals. The term refers to compounds including potassium sulfate, potassium-magnesium sulfate, potassium nitrate, potassium carbonate, potassium oxide, and potassium chloride. Among these, potassium chloride (KCl), also known as muriate of potash (MOP), is the most commonly produced and used form of potash.
Potash is primarily used to produce fertilizers, which are essential for plant growth and development. Fertilizers containing potash help to support plant growth, increase crop yield, and enhance disease resistance. Additionally, potash helps to improve water preservation, making it an indispensable supplement to the natural nutrient content of soils. Soils often lack these essential nutrients, or growing crops have depleted them, making potash a necessary addition to maintain soil fertility. With approximately 95% of potash being used in fertilizers, its role in agriculture cannot be emphasized enough. The remaining 5% is used in the production of potassium-bearing chemicals, such as detergents, ceramics, pharmaceuticals, water conditioners, and alternatives to de-icing salt.
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Potash is mined from underground deposits, either through conventional underground ore mining or by injecting water into the underground ore body and extracting the resulting brine. According to a report by the Canadian Government, potash production was estimated at 67.5 million tonnes globally in 2023, with Canada contributing 32.4% of the global supply. Canada, Russia, and Belarus dominate global potash production and accounted for 65.9% of the total in 2023. Canada is the world’s largest producer and exporter of potash, with 11 active mines in Saskatchewan, producing 21.9 million tonnes and exporting 22.8 million tonnes in 2023, which accounts for over 41% of global exports.
Potash prices have fluctuated over the years, declining from 2013 to 2016 and remaining relatively low until 2020. However, in 2021, prices rose sharply due to strong demand, and the surge continued into 2022, peaking at $1,202 per tonne in April, driven by geopolitical tensions and the Russian invasion of Ukraine. By June 2023, prices had fallen to $328 per tonne as global supply concerns subsided.
Potash is a vital nutrient for plants and animals, and its importance in fertilizers cannot be overstated. As the world’s population continues to grow, the demand for potash is likely to increase.
A close up of an essential mineral being extracted from a large rock wall.
Our Methodology
To compile our list of the 11 best potash stocks to buy according to hedge funds, we sifted through financial media reports and potash-related ETFs to find companies that are involved in the production and processing of potash. We then used Insider Monkey’s hedge fund database to rank 11 stocks with the largest number of hedge fund holders, as of Q3 2024. The list is sorted in ascending order of hedge fund sentiment.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Compass Minerals International, Inc. (NYSE:CMP)
Number of Hedge Fund Holders: 29
Compass Minerals International, Inc. (NYSE:CMP) is a leading producer of essential minerals, including salt, sulfate of potash, and magnesium chloride. The company operates high-quality, low-cost assets, including the largest sulfate of potash facility in the Western Hemisphere located in Ogden, Utah.
Compass Minerals International, Inc. (NYSE:CMP) utilizes a natural pond complex-based process to produce sulfate of potash in Ogden, Utah. This approach is a more environment-friendly and cost-effective option and is particularly beneficial as it results in a product that is organic and approved by organizations such as the Organic Materials Review Institute (OMRI), California Department of Food and Agriculture (CDFA) and USDA National Organic Standards Board (NOSB). This makes it an ideal choice for organic crop growers. The location of the Ogden facility is also beneficial as it is located in the proximity of major producing areas on the West Coast.
Compass Minerals International, Inc. (NYSE:CMP) is focusing on the restoration of the pond at Ogden, which will improve the profitability of its plant nutrition business. This is a multiyear process and the company has been engaged with it for a couple of years. The company is implementing new processes, such as the use of potassium chloride. By supplementing its produced tons with potassium chloride, the company can reduce its reliance on harvested brine, which can be variable in quality and quantity. This approach will also allow the company to improve the consistency and quality of its sulfate of potash products, which is critical for meeting the needs of its customers. In addition to its pond restoration efforts, Compass Minerals International, Inc. (NYSE:CMP) is also investing in a new dryer and dust collector at its Ogden facility, which will help to improve the efficiency and cost-effectiveness of its sulfate of potash production process.
Overall CMP ranks 5th on our list of the best potash stocks to buy according to hedge funds. While we acknowledge the potential of CMP as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than CMP but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.