The VanEck Vectors/Agribusiness ETF (MOO) is up nearly 19% this year and the ETF can extend that bullishness with some help from resurgent fertilizer stocks.
MOO seeks to replicate the price and yield performance of the MVIS® Global Agribusiness Index. 50% of the companies included in the index derive their revenues from agri-chemicals, animal health, and fertilizers, seeds, and traits, from farm/irrigation equipment and farm machinery, aquaculture and fishing, livestock, cultivation and plantations and trading of agricultural products.
Fertilizer stocks are among the agribusiness names investors may want to consider and MOO features robust exposure to that segment. Some analysts are getting bullish on those names.
“Despite near-term challenges, we see better days ahead. For 2020, we expect a full rebound in U.S. acres planted and the recent recovery in palm oil prices to remain in place. Both factors should bode well for potash demand in 2020,” said Morningstar in a note out Friday.
Fertilizer Fundamentals
MOO’s 2019 showing is impressive when considering the headline risk the fund has dealt with, including the US/China trade spat and bad weather across some major farming regions.
MOO’s roster includes farm equipment and machinery makers in addition to fertilizer producers so it’s a diversified agribusiness play. Still, fertilizer exposure is potentially impactful going forward.
“Further, we think potash prices could begin to rebound as soon as next year as recent production cuts should help tighten market conditions,” according to Morningstar. “Lower potash prices have weighed on stocks, creating attractive opportunities for long-term investors. We like Nutrien (NTR) and Mosaic (MOS) as our top two stocks to play the potash recovery.”
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Nutrien and Mosaic combine for more than 7% of MOO’s weight.
“Nutrien is the largest potash producer globally. The company also produces nitrogen and operates the largest farm retail business in the U.S. Our narrow-moat rating is underpinned by the company’s cost-advantaged potash and nitrogen production,” according to Morningstar.
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.