Seth Goldstein (Morningstar, CMP)

Seth Goldstein (Morningstar, CMP) by The Financial Exchange

00:04:14

Transcript - Not for consumer use. Robot overlords only. Will not be accurate.

We're joined now by Seth Goldstein for more servers actually talking to us about Berkshire Hathaway one of the best performing stocks in market history welcome sent. All think he I was going to discuss Compass Minerals that gave the camel's I've Berkshire earlier than this about them and that the sounds good so I. As a general overview Compass Minerals the kicker is he MP itself bolt that's primarily used for highway connecting in the midwest as well specialty. He fertilizers. So cook was the stock has fallen about 20% that the copy record date. 82 consecutive year for or result in February and shares now trade at a seven year low. But because the companies felt the wasting all their sales are linked to how much its nose in their mid west territory. But the big question here is that after two consecutive mild winters. Had climate change permanently changed all winters and they're forceful demands for compass. It's pretty appealing way to bet on bet on whether I've never heard that one a can't go on. Yet it's a so we've looked at 420 years so whether data in the midwest and we've found that a you know quote unquote normal winter. Is that what's different now from twenty years ago so what we do. Think it's likely that nose slightly less in the future due to warmer weather. We thought they get like please no more over the next decade and be mild winters of the past two years. And so the reason we like cult that is because the company has a large cost advantage be of produce sultan fertilizers at a much lower cost them their competitors. The way it does no we think low cost assets should drive profit and ultimately boost for. Now you mentioned that their losses have really just been due to weather patterns in the midwest is there anything else that's really been hurting this company you do need to be worried about management of their input costs going on with Compass Minerals. I don't think so because they do had they a large cost advantage to produce the alt. Home minister has done a pretty decent job investing in their low cost that's set to increase that competitive and is gesturing and their remote sources. So I I think the key major factor for carpet is going to be no fall and winter in the midwest. They have many main big competitors in that area are they pretty much the only player in town. So there largest competitor is Kate plus that they. A German company who produces the Morton's salt brand on uncertain when knows the umbrella girl at their consumer salt. But that's their largest competitor for. Again they have pretty large cost advantage over Morton. On. And defect that can produce sold much cheaper which boost their profits when it snows. Whenever I look at companies like this that are very specific I get a little bit concerned about evaluating their their revenues tend to come in pretty lump is that the case with this company where all their sales are really happening in in six maybe four month time period and then the rest of the year it's pretty much just quieter how to. How does that work has management deal with that. Well also you are right generally the winter months are went carpet this whole statement has been most sales but it's. In order sort of even things out they have been investing more in their fertilizer business they just mean acquisition of a Brazilian. Fertilizer company last year to boost the third and fourth quarter sales. All we've also been trying to expand their salt products more to the consumer and industrial paper products where demand is less he's you know. Got well interesting company ticker symbol on that is ASEAN. Thank you. Seth Goldstein with morning start talking about Compass Minerals and as you mentioned a business like that I do look at it. And it's an interesting play but it it does get a little bit narrow when you do worry about its revenue being disrupted. Just because it is such a narrowly focused business so. It's a company that if you take a look at it historically. It doesn't tend to move around a lot in the long run but it can have some short term fluctuations definitely.
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