This article is part of our real-money portfolio series.

One of David Gardner's investment principles is to add to your winners. It's hard to do because we tend to anchor on the price we originally paid for our shares and find ourselves reluctant to add more at a higher price. Yet if the company is as good as believed, it should turn out to be a smart move as the company continues to perform well, sending the share price even higher.

Besides, wouldn't you feel dumb if you balked at adding, only to see the shares double from that point?


Now, I'm not saying that this is what will happen with CF Industries (NYS: CF) , but the potential for higher share prices is there. I first purchased shares for the real-money portfolio I run for the Fool at the beginning of this year when the shares were $160.50. Last night, they closed at $203.65, for a 27% gain in 11 months. Pretty good, especially as the S&P 500 was up just over 8% in the same time frame. And the company has done nothing but improve over that period.

CF Industries is a major supplier of nitrogen-based fertilizer to farmers planting corn, wheat, cotton, and soy in the U.S. It also sells some phosphate fertilizer, but competitors Mosaic (NYS: MOS) , PotashCorp (NYS: POT) , and Agrium (NYS: AGU) are significant players in that area (as well as in nitrogen). Further, they also sell potassium fertilizer (in the form of potash), the third component of fertilizer's NPK triumvirate, while CF Industries does not, which gives it an advantage.

Where it's been
So far this year, while CF's revenue has grown by 5.5%, net income has shot up a whopping 25.2%, thanks in large part to a 7.8% drop in cost of goods. And that's a direct result of lower natural gas prices, a major input to its cost of producing nitrogen-based fertilizer. Further, the company has significantly strengthened its balance sheet, putting $1 billion more cash on the books and moving to a net cash position of $616 million versus a net debt position of $406 million at the beginning of the year.

The last point, looking backward, is cash flow. While it's brought in the same amount of cash from operations over the past four quarters as it had in 2011, it's investing more into capital expenditures, expanding its plants so as to be able to produce more nitrogen fertilizer. Two plants -- Donaldson, La., and Port Neal, Iowa -- will see significant expansion to the tune of $3.8 billion over the next few years.

Where it's going
So free cash flow won't be growing as much as net income has. That's fine by me, however. The dividend is not in danger and the company is growing capacity to meet higher demand for its nitrogen fertilizers. That demand is coming from more cropland being planted. Estimates for next year are 97-million acres of corn to be planted which is more than was planted this year.

The big unknown, of course, is what will happen with natural gas prices. Natural gas is a major input cost in making urea and urea ammonium nitrate from nitrogen condensed out of the air. If prices rise, profit margins at CF will compress. The good news, however, is that current projections by the U.S. Energy Information Agency have relatively flat natural gas prices for the next several years. While that's encouraging, I'll keep a close eye on this going forward and think of selling if the price starts to get too high.

Good performance by this company over the past three quarters has rewarded it with a higher price than when I first bought. Yet the story isn't over and I expect good performance going forward for the next several years thanks to low natural gas prices and increased demand for fertilizer. Therefore, I'm going to invest more in this winner in my Messed-Up Expectations portfolio.

Come and discuss these and other investments on my Messed-Up Expectations discussion board, or follow me on Twitter.

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This article is part of our real-money portfolios series, where we give some of our most promising stock analysts cold, hard cash to manage on the Fool's behalf. We'd like you to track our performance and benefit from these real-money, real-time free stock picks. See all of our analysts (and their portfolios).

The article CF Industries Is Performing Well, so I'm Buying More originally appeared on Fool.com.

Jim Mueller has no positions in the stocks mentioned above. The Motley Fool owns shares of CF Industries Holdings. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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