The best performing stock in the S&P 500 is up 20% since the war began. It's not tied to the oil market
How a nitrogen fertilizer shortage propelled low-profile player CF Industries Holdings to the top of the U.S. broad market
CF Industries shares have soared more than 20% since the start of the war with Iran / Photo: CF Industries
While Wall Street is focused on the jump in oil prices due to the conflict with Iran, a real breakthrough occurred in the fertilizer sector, MarketWatch writes. The rise in prices for these products, caused - as in the case with oil - by the disruption of shipping in the Strait of Hormuz, allowed shares of little-known CF Industries Holdings, which produces nitrogen materials, to become the leader of the S&P 500 index in March.
The company's shares soared by 20.7%, significantly outperforming the oil giants: the State Street SPDR S&P Oil & Gas Exploration & Production ETF added only 7.1% over the same time. And the S&P 500 broad market index lost 1.5%.
Key factor
The Middle East accounts for between 35% and 40% of all global exports of the nitrogen fertilizer urea (urea), which is used, for example, in crop production and dermatology. That's more than the region's share of global crude oil exports, explains RBC Capital analyst Andrew Wong.
Prices for that fertilizer have jumped about 35% since the Iranian conflict began, while crude oil futures have risen 32%.
The region also produces almost one-fifth of the world's liquefied natural gas (LNG), a critical feedstock for nitrogen fertilizer production. The rising cost of LNG has increased costs for producers, which benefits CF Industries, Wong said.
Additional growth factor
The strength of CF Industries' stock is not only due to the rising commodity market and fertilizer prices, adds Mizuho analyst John Roberts. In his opinion, the company has a "defensive" status due to its hard assets and independence from AI technologies. The analyst calls this strategy "anti-AI HALO" - the acronym HALO stands for hard assets, low obsolescence.
Roberts says the company is protected from the disruption that artificial intelligence has caused in other market sectors such as software, fintech and IT consulting.
What about the stock
CF Industries has so far been off the radar of the broad market, MarketWatch notes. The average daily trading volume of the company's shares over the past 90 days is about 2.6 million units, less than half the average volume of S&P 500 components. And its market capitalization of $18.12 billion puts it only 409th among index companies.
At the premarket on March 12, the company's shares were up nearly 5%. A neutral view prevails among analysts covering CF Industries: 15 recommend to hold positions in these securities. Four recommend buying them, and three recommend selling them. It is noteworthy that three months ago, analysts were more optimistic: at that time, eight advised to buy, 12 advised to hold the stock in the portfolio, and only one analyst gave the company a "bearish" rating.
This article was AI-translated and verified by a human editor
