CF Industries generated a lot of cash from an agricultural boom in 2022. Following a 50+% decline from its cycle peak, the fertilizer manufacturer is now using that cash to buy back stock.
The company is an active “Best Idea” short for Hedgeye Industrials analyst Jay Van Sciver, who believes the attempt to run the business on a private equity model doesn’t bode well.
“To pretend you’re going to run it for no growth and cash when you’re a price taker in a highly cyclical industry isn’t really all that plausible of a scenario,” explains Van Sciver in this clip from The Call @ Hedgeye.
“If you shorted CF Industries the quarter that they reported their peak earnings, all you did was make money every time you shorted it again at a lower high,” says Keith McCullough. “That’s how you short stocks.”
“Similarly, if you bought an industrial at late-cycle pricing that still hadn’t printed their highest yet ever, you made money on the long side,” McCullough adds. “This is really basic for pros that do rate of change, that understand front running rate of change is the real expectations game.”
Watch the full clip above.