The VanEck Vectors/Agribusiness ETF (MOO) is up nearly 18% and is in position for one of its better annual performances in recent years, perhaps there could be more upside to be had with agribusiness 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.
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.
American farmers have been struggling with low crop prices and the loss of Chinese markets due to President Trump’s trade struggle with Beijing and are therefore likely to purchase $464 million less agricultural machinery, mainly tractors and harvesters, from Deere & Co. this year than the manufacturer predicted.
“Heavy rains have flooded farmland across much of the Midwest, leading to the lowest total U.S. acres planted in more than a decade,” said Morningstar in a recent note. “A weak planting season sent agriculture stocks lower since the start of April, following the release of the initial weekly USDA crop progress report. Although fewer acres planted will likely result in lower crop input volumes, we expect profit impacts to be short-lived. Amid increased June planting, some stocks have recovered. However, others remain down, sprouting attractive opportunities across our coverage.”
Move In On MOO ETF
The $681.2 million MOO, which turns 12 years old at the end of this month, holds 57 stocks. Holdings “must derive at least 50% of total revenues from agribusiness to be added to the Index,” according to VanEck.
Fertilizer stocks are among the agribusiness names investors may want to consider and MOO features robust exposure to that segment.
“In fertilizer, we see some impact on U.S. volumes for nitrogen, potash, and phosphate,” said Morningstar. “However, we see little impact on global potash prices, as growth across other geographies will offset lower U.S. volumes. Our top fertilizer picks are no-moat Mosaic (MOS) and narrow-moat Nutrien (NTR). Each company trades in 4-star territory, given our $35 per share fair value estimate for Mosaic and $68 and CAD 91 fair value estimates for Nutrien.”
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