27 Dec 2017
- On a market capitalization-weighted basis, our basic materials coverage trades at a 39% premium to our estimate of intrinsic value, making it the most expensive sector we cover.
- Miners we cover are generally substantially overvalued, 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 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 in the near term.
- We continue to expect the two big deals in the agriculture industry (Potash-Agrium and Bayer-Monsanto) 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.
Seth Goldstein, CFA does not own shares in any of the securities mentioned above. Find out about Morningstar's editorial policies.