Intrepid Potash (IPI)

[investora2z]

The downtrend is gathering momentum. IPI has broken below the short term averages and is at the 52 week low. The fall on Thursday was significant as the volumes were double the 10 day and the three month averages. So the downtrend which started in February after the weak earnings is now getting firmly established. The net profit was down 20% and even the gross margins contracted. The next supports are difficult to ascertain and, if the stock falls a few more percentages with volumes, then we may be looking at a major correction. It may not fall to $14.50 levels immediately, but it may eventually reach there unless the next quarters deliver more promise. The earnings have to improve and the margins have to increase. In absence of this, it is going to be a bad phase for the investors. With institutions holding 72% of the shares, the downtrend may not be too fast unless some big investor decides to pull the plug. Caution is definitely required. For boosting sentiment, the company can do several things but ultimately, the future of the stock will be dependent on the fundamentals. To grow to the next level and also to increase its strategic importance in the Potash business, the company can look at acquisitions and investments in smaller companies. This can be done for companies which are in exploration stage like Passport Potash (PPRTF) or other companies operating closer to IPI's mines. These companies are looking for partners and investors. The mining companies deliver good returns if investments are made at the appropriate stage when they are not valued for their potential. This is usually the period when they are exploring the potential of their properties. Once the production starts, the returns are high. Stakes in smaller companies can, therefore, give IPI double advantage.