Sociedad Quimica

I've been taking a closer look at commoditiy-related mining stocks to fill a hole currently in my retirement portfolio. So, when Jim Cramer recently said that his favorite mining stock was Sociedad Quimica (SQM), a stock I've never heard of before, I did take note.

SQM is a Chile-based company that produces fertilizer, iodine and lithium. The latter is of key significance to the battery business as the company is the largest supplier of lithium to the world.

While I don't know much about the supply and demands of the lithium market (or of any other product the company produces), I do know a good stock when I see one. Within both the technical and fundamentals screens I've run in this sector, this stock consistently comes up as the top dog. That tells me that I should look for a good entry, in spite of the fact that this stock has already had quite a nice run.

So, how I do avoid overpaying for a stock like SQM? It is easy, I put it on a watch list and set an alert to be notified if and when the stock ever falls back to an attractive price area (i.e. its former uptrend channel). Although I'll miss a number of opportunities this way, I'll also miss a number of situations where I would have bought a stock at the wrong time at the wrong price. Something to be avoided if at all possible.