Commodity Stocks Not Attractive Despite Price Declines

Morningstar analysts continue to forecast weak Chinese fixed asset investment and commensurately tepid demand growth for related commodities such as copper and iron ore

Daniel Rohr, CFA 2 February, 2016 | 12:11PM
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Despite significant share price declines in recent months, the materials sector is not a land of investment opportunity. The average stock under our coverage trades at a 6% premium to our assessment of intrinsic value. However, the mean masks significant dispersion of valuation assessments.

Miners coping with poor Chinese demand and weak commodity prices are looking to sell assets and shrink

Morningstar analysts continue to forecast weak Chinese fixed asset investment and commensurately tepid demand growth for related commodities such as copper and iron ore. We remain relatively bullish on commodities oriented to the Chinese consumer but nonetheless expect Chinese household consumption growth to decelerate from the trailing 10-year average.

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Daniel Rohr, CFA  is a senior equity analyst at Morningstar.

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