Meaning of the markets this week: April 10

A quick way to gain broad exposure to the agricultural sector is through the iShares Global Agriculture Index ETF, which is known by the aptly named ticker symbol of COW and trades on the TSX. Investors in COW are directly diversified across 36 companies, mainly based in the US, with a little from Italy, Canada and Israel. The largest companies are Archer Daniels Midland, Mosaic, Corteva, Bunge and John Deere.

Here’s a breakdown of the subsector weights:

Source: Blackrock.com

Units of COW have already made 20% gains in the past month, so future earnings opportunities are “baked in” to some extent, but with an overall P/E ratio of 14.27, it still seems conservatively valued compared to effervescent markets. COW’s past year and three-year returns of 34% and 26% respectively show a favorable longer-term trendline.

Source: Yahoo Finance

If you’re looking for a purely Canadian single-stock approach to the situation, Saskatchewan-based Nutrien (NTR) just happens to be the world’s largest producer of potassium. And it is an integral part of the global fertilizer supply chain. Together, Russia and Belarus account for 37.6% of the world’s potassium production. While analysts can’t be sure how much of Belarus and Russia’s capacity will be hampered by war, tariffs and sanctions, there’s no doubt that many buyers of potassium will be looking for a more stable supplier in the near future.

However, as with our favorite bovine ETF, the question quickly becomes, “Is there a best-case scenario already priced in for Nutrien?”

Source: Yahoo Finance

Steven Hansen, general manager and equity analyst at Raymond James, believes there is still some meat on the bone when it comes to future returns. Here are four quotes from him, via Bloomberg:

“They have a lot of untapped potash capacity that they could bring to market, but they haven’t yet. The point is they need to hire more people and buy new equipment.”

†[Nutrien is], really, the only player that still has idle or overcapacity available worldwide. So they will play a very important role in, I say, replenishing with the offerings that have been withdrawn from the market in the Eastern Hemisphere.”

This post Meaning of the markets this week: April 10

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