If you have your finger on the geopolitical pulse, your next best move could potentially be to target agriculture or Ag stocks. Why? Fundamentally, the underlying ag stocks industry responds to supply and demand. And since humans will always need to eat, reasonably stable agro businesses should enjoy permanent relevance.
However, a more pressing catalyst exists and that’s Russia. Seemingly unwilling to let go of the spotlight no matter how ugly, the Russians find themselves in a pickle. Despite being one of the world’s top oil producers, it faces shortages of fuel that’s crucial for harvesting. Per Reuters, the situation may get even worse in the coming months, cynically bolstering agriculture stocks to buy.
Essentially, the Kremlin has to make a choice: continue pressing its unprovoked attack on Ukraine or pull back and save its struggling economy. All indications point to Moscow going with the former approach, which may leave a big agricultural gap. Thus, these are the Ag stocks that may potentially benefit.
Ag Stocks: Bunge (BG)
One of the top Ag stocks available, Bunge (NYSE:BG) is an international soybean exporter. In addition, it’s involved in the food processing, grain trading, and fertilizer industries. Since the start of the year, BG stock gained over 13% of its equity value. To be fair, it dipped more than 5% in the trailing month. Still, there could be an enticing opportunity here.
For one thing, Bunge benefits from a predictable business. Therefore, it enjoys a three-year revenue growth rate of 14.7%, above 73.5% of its peers. Also, it’s consistently profitable and features a return on equity (ROE) of 20.87%, above 87.53% of sector rivals. Despite these strong financial metrics, the market prices BG at only 8.46X forward earnings. In contrast, the sector median lands at 15.2X, possibly representing great value for agriculture stocks to buy.
Finally, analysts peg BG as a moderate buy with a $133.57 price target, implying over 23% upside.
A major U.S. agricultural chemical and seed company, Corteva (NYSE:CTVA) is another top-tier name among Ag stocks. Presently, the company commands a market capitalization of over $36 billion. However, it’s not quite getting the love from Wall Street that it arguably deserves. Since the January opener, CTVA fell more than 13%.
In the trailing one-year period, CTVA shed over 10% of its equity value. Still, the red ink could make Corteva one of the more attractive agriculture stocks to buy from a valuation standpoint. For example, shares trade at only 1.38x book value. In contrast, the sector median comes in at 1.69X, meaning that Corteva ranks favorably below 60.82% of the industry.
Also, the company offers a pretty decent balance sheet. For instance, its equity-to-asset ratio is 0.59X, above the sector median of 0.54x. Lastly, analysts peg CTVA as a strong buy with a $69.85 target, implying almost 37% upside.
Easily the riskiest idea on this list of Ag stocks, FMC (NYSE:FMC) is an agricultural sciences company. Per its website, FMC advances farming through innovative and sustainable crop protection technologies. From its industry-leading discovery pipeline to unique application systems, FMC gives agro-businesses the tools they need to succeed. Unfortunately, the same cannot be said about its stock price.
Since the start of the year, FMC lost a worrying 46% of its equity value. Just in the trailing one-month period, FMC gave up more than 22%. Still, the hope here is that the fundamental geopolitical catalyst – that is, Russia apparently biting off more than it can chew – may provide a demand lift.
Of course, it’s a speculative venture. Still, in large part because of the red ink, an argument can be made that FMC has been de-risked significantly. For instance, the market prices FMC at forward earnings multiple of 9.38x, below the sector median of 11.57x. Looking to the Street, analysts peg shares as a moderate buy with a $107.27 target, implying over 60% growth.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.