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Oil is the most demanded commodity in 2022 after a catastrophic slump in 2020. Due to the sector’s remarkable rebound from rising crude prices, energy stocks generated outsized returns last year. As of February 16, 2022, the energy sector is up 23.23% and still booming.
With the exception of the materials, financials and communication services sectors, the other seven primary sectors are in negative territory. The rise in oil prices seems so unstoppable that it is almost certain to reach US$100 a barrel. RBC Capital Markets analysts say a collapse in demand is the only thing that could reverse rising prices.
Energy stocks are hot buys today, although commodities in general could be the best asset class this year. Thus, undervalued stocks Nutrien Ltd. (TSX:NTR)(NYSE:NTR) and Agritech Green (TSX:NPK) from the agricultural sector could also offer superior returns.
Nutrien is a leading supplier of agricultural inputs and services. The $54.38 billion Saskatoon company offers potash, nitrogen, phosphate and sulfate products. It is also a distributor of crop nutrients, crop protection products, seeds and merchandise.
The leading agricultural stock rewarded investors with a total return of 59.9% last year. NTR trades at $95.28 per share and pays a decent dividend of 2.42%. In 2021, sales increased 33% compared to 2020. The highlight of the year was net profit of US$3.17 billion, a 593% year-over-year increase . Free cash flow increased by 135% compared to the previous year.
Interim President and CEO Ken Seitz said, “The benefits of Nutrien’s integrated business were demonstrated in 2021 as we delivered record financial results and made significant progress on our strategic objectives at long term. He adds that the company has used the scale and reliability of its world-class supply chain.
Seitz said the outlook for global agriculture and agricultural input markets is very strong. Nutrien is well positioned to generate significant growth in earnings and free cash flow in 2022. Management promises to continue to advance its strategic priorities while maintaining a disciplined approach to deploying capital. The goal is to grow the business and return significant cash to shareholders.
Exponential growth expansion
Verde Agritech performed very well in 2020, given its overall yield of 237.3%. At $6.27 per share, current investors are up 123.9% year-to-date. Based on market analyst buy rating and 12-month average price target of $12.39, the upside potential is 97.6%.
The $339.75 million agro-tech company is exploring and developing mineral properties in Brazil. Its flagship product is a fertilizer and soil amendment called Super green sand. Verde owns a 100% interest in the Cerrado Verde project, the source of potassium silicate rock, a glauconious siltstone material.
In the nine months ended September 30, 2021, Verde’s revenue and net profit increased 169% and 192% compared to the same period in 2020. According to its founder and CEO, Cristiano Veloso, the company will strive to maintain exponential growth expansion for the foreseeable future. Management will present Verde’s fourth quarter and full year 2021 results on March 29, 2022.
Oil will continue to rise as long as demand exceeds supply. However, the Energy Information Administration (EIA) predicts that the average oil price will fall to US$75 and US$68 per barrel in 2022 and 2023, respectively. Nutrien and Verde Agritech are stable investments instead of energy stocks.