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Quarter-End Insights

Pockets of Value Remain in Agriculture, Chemicals Industries

Decline in the demand for lithium should be short-lived.

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The Morningstar US Basic Materials Index outperformed the broader market in the second quarter of 2020 by over 400 basis points. Year to date, the sector has now lagged the Morningstar US Market Index by over 800 basis points, down from a year-to-date loss of more than 760 basis points a quarter ago. Trailing one-year underperformance fell to 530 basis points, down from more than 1,000 basis points a quarter ago. As a result of the second-quarter rally, just a third of the U.S. basic materials stocks we cover now trade in 4- or 5-star territory. However, we think investors can still find attractive risk-adjusted opportunities in the sector, particularly in the agriculture and chemicals industries.

U.S. materials index versus the U.S. equity index. - source: Morningstar

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