Skip to Content
Morningstar
Get 14 Days Free
Quarter-End Insights

Basic Materials: The Most Overvalued Sector We Cover

Propped up by Chinese stimulus, mined commodity and miner share prices remain overvalued.

Seth Goldstein
Mentioned: , , , , , , , , ,
  • 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 does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.

We’d like to share more about how we work and what drives our day-to-day business.

We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.

How we use your information depends on the product and service that you use and your relationship with us. We may use it to:

  • Verify your identity, personalize the content you receive, or create and administer your account.
  • Provide specific products and services to you, such as portfolio management or data aggregation.
  • Develop and improve features of our offerings.
  • Gear advertisements and other marketing efforts towards your interests.

To learn more about how we handle and protect your data, visit our privacy center.

Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.

To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.

Read our editorial policy to learn more about our process.