27 Sep 2017
- On a market capitalization-weighted basis, our basic materials coverage trades at a 37% premium to our estimate of intrinsic value, making it the most expensive sector we cover.
- Miners we cover are generally substantially overvalued and few trade in line with our fair value estimates, reflecting our expectation for a structural change in demand growth from China as its economy matures and transitions toward less commodity-intensive and more consumption-driven economic growth.
- Gold is among the few mined commodities that isn't directly tied to the fortunes of Chinese fixed asset investment, but as the Federal Reserve continues to pursue rate increases, prices look primed to fall.
- Two of the four big deals in the agriculture industry were consummated in the third quarter (ChemChina's acquisition of Syngenta and the Dow-Dupont merger), with the remaining two (Potash-Agrium and Bayer-Monsanto) likely to receive regulatory approval and close within the next 12 months.
- Despite temporary hiccups, U.S. construction activity continues to build momentum; the long-term outlook remains bright for lumber and aggregates companies hitched to this wagon.
Daniel Rohr, CFA has a position in the following securities mentioned above: CMP MON VMC. Find out about Morningstar's editorial policies.