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iShares S&P/TSX Capped Materials Index ETF (XMA)
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Materials Select Sector SPDR (XLB)
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Nutrien Ltd. (NTR)
Q: Based on today’s environment is NTR a sell? The materials sector is pretty diverse, are there two or three CDN companies that you would have a high degree of confidence would outperform just holding XMA for materials exposure? Or would you steer clear of Canada altogether, and if so, applying the same criteria suggest two or three U.S companies that could outperform XLB in the near term.
5i Research Answer:
XLB, as an ETF, owns 37 different companies and any single company will have more of both risk and potential compared to it. NTR is up 12% YTD and at 14X earnings with a 4.3% dividend and good free cash flow we would not consider it a SELL today. Alternative materials stocks like AEM, LUN, FNV could outperform but only if their associated commodities do well. While there is minor tariff risk in some, keep in mind most have some (or a lot) of Canadian dollar expenses and get their revenue in US dollars, mostly. This can be a good offset if our currency is weak. We would be comfortable holding any of the ones above. BUT...if an investor wants more safety and diversity, then XLB or XMA is the way to go.