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Quarter-End Insights

Basic Materials Among Most Undervalued Amid Continued Underperformance

Compelling opportunities in building materials and agriculture firms, which are less exposed to macroeconomic headwinds.

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The Morningstar US Basic Materials Index’s underperformance has accelerated in 2020. Year to date, the sector has now lagged the Morningstar US Market Index by more than 740 basis points, driving trailing one-year underperformance of more than 860 basis points. As a result, more than 70% of the U.S. basic materials stocks we cover now trade in 4- and 5-star territory. COVID-19 has caused a massive and dramatic slowdown economywide. However, we think investors can find attractive risk-adjusted opportunities in sectors such as building materials and agriculture, which are less exposed to the macroeconomic environment.

Continued Underperformance Has Created Opportunities - Morningstar

Kristoffer Inton does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.