SQM – steady as she goes

sociedad-qumica-y-minera-de-chileSociedad Qumica y Minera de Chile or SQM for short, has not been in the news of late, so has been off of my radar.  Having had some spare time yesterday, I have been revisiting a few old friends & this stock has caught my eye for a couple of reasons.

  • Its the fourth largest holdings in the iShares MSCI Chile Index – ECH
  • That index has performed very well & looks to continue its steady upwards trace
  • At the end of April, SQM reported some surprising figures year on year (Q1 2009 v 2008) : net revenue increas of 33% on 2008, with the NYSE traded ADRs providing earnings of $0.33 per share, compared to $0.25 share in Q1 2008.
  • As if that wasn’t enough, to round off this bullish performance, SQM also showed a 39% increase in operating income.

For those that are not familiar with SQM, it is primarily a producer of fertiliser for agricultural, infield use. The company has however diversified into other lines in the past few years.

In fact, SQM is the largest producer of Iodine & Iodine derivatives globally, which has a number of non-agricultural applications, including medical & industrial. SQM to date, holds rights to the largest source of Caliche Ore in northern Chile.

At present, SQM is also the largest producer of lithium globally as it owns the production rights from the Atacama Salar deposits in the Andes. As the potential for Lithium hydroxide batteries for automotive use is becoming more apparent, SQM are set to be in pole position to exploit any upcoming technical breakthroughs.

The final string in the production bow, is that it has a very strong product line in nitrates for use in agriculture, industry & petrochemicals. SQM are also looking at solar power using Sodium & Potassium Nitrate as a heat transfer medium. With solar being very much in the public (& investor consciousness), this could be a key area for them in the very near future.

Now moving on from the “bleeding obvious” (7.48), if you have a browser, you can Google all of this in less than 10 minutes. What has really got me going is the latest charts that SQM has produced.

SQM

Since the large market correction im March, the stock has performed remarkably well, especially considering the recent volatility of its perceived peers : MON, AGU, POT etc have all been up & down like the proverbial tarts knickers. In the last month, even whilst others have been selling off & also under some pretty heavy selling volumes itself, SQM has managed to keep its head above water & is defiantly holding to a very narrow trading range between its 50 & 20 day SMA. Tough little blighter. Even more important for me is the RSI indicator, which is running reasonably flat & not trending up or down from the 50 mark since mid-June.

Turning to the P&F chart, we can see that SQM has had a definite upward trend for the last 6 months. Any drop in the current price looks as though it will soon correct to the upside & the Price Objective yielded is 53.00 which is a significant premium on Thursday’s close at 36.13.

SQM PFAm expecting to see some volume coming into the stock shortly & have a personal price target of 45 before I look at halfing out & looking for pullbacks.

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