TSX:NTR - Post Discussion
Post by
retiredcf on Apr 17, 2023 3:27pm
TD Notes
Resources
In today's report, we highlight the trends and the movements we are witnessing in the resource sectors and the major commodities.
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The rising gold to lumber ratio could be signaling a warning for equities, in our view. Previous spikes have occurred in advance of major market declines back in 2018 (rising yields, slowing economic growth), 2011 (U.S. debt downgrade, Euro debt crisis), and 2008 (GFC). Exhibit 1.
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Lithium, last year's leading commodity, continues its precipitous fall from its late-2022 high, declining 18.8% last week and 58.9% through 2023. Metals have been highly mean reverting with HRC Steel +63.2% year-to-date (-52.0% last year), copper +7.9% (-14.1%), and nickel -19.6% (+43.2%). Exhibit 2.
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Stella-Jones Inc. (SJ-T, portfolio weight 3.7%) continues to rank as the top scoring name within the materials sector with its rising and highly predictable earnings growth (QGM rank 15). With its more defensive characteristics, low F-P/ E by historical measures (12.2x versus historical median of 15.1x) and five-year dividend growth of 109%, Stella-Jones is our top pick within the materials sector (ex-gold). Along with its consistent revenue growth, a technical breakout above $55 would be another bullish signal for Stella-Jones. Exhibits 3 and 4.
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Speculation in grain markets have turned bearish with net positions for both corn and wheat near multi-year lows. The decline in speculative levels has been driven by a strong increase in short bets against the commodities — corn short position +144.2% year-to-date; wheat +36.9%. Exhibits 5 and 6.
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Supportive for large cap Nutrien Ltd. (NTR-T) is the positive turn in fertilizer prices last week (urea +9.6%, potash +4.6% and phosphate +4.1%). This marks the first weekly rise in all three commodities since March 2022. After steep declines in each from their early-2022 highs, a potential bottoming may be near, in our view. Exhibit 7.
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Methanol prices ticked up last week (+2.7%), ending a stretch of seven weekly declines in which the commodity has fallen 31.4%.
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