Potash Corp. (POT) stands to benefit from the rising demand for fertilizer by emerging markets, especially as the growth of these nations is expected to be robust over the next decade despite a potentially inflationary macroeconomic environment, says Wally Obermeyer, President of Obermeyer Asset Management.
“An example of a position that would, in our view, play into that pretty well would be Potash Corp., up in Canada. The global demand for food is growing, particularly given rising incomes in China, India and other developing economies. These civilizations will likely need fertilizer to feed their growing populations; this product will likely have pricing power given increased demand,” Obermeyer said.
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Obermeyer says he diversifies his portfolios in the current macroeconomic environment, but one trend with enough power to pull equities through this theme of uncertainty about the inflationary future of the economy is the growth of emerging markets.
“As we look at the situation and try to be good stewards of our client’s capital, we want to balance the potential risks of this large public debt igniting a highly inflationary environment at some juncture. The problem is, we don’t know if this high debt will actually be inflationary. We expect that it will be, but we don’t know for certain; if it does lead to inflation, we don’t know if we’ll see it in six months or one month or seven years. Ultimately, we want to position portfolios so that our clients are in a solid position over a broad range of potential outcomes,” Obermeyer said.
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