Vale S.A. (VALE): Why Are Analysts Bullish on This Potash Stock Right Now?

We recently compiled a list of the 10 Best Potash Stocks to Buy. In this article, we are going to take a look at where Vale S.A. (NYSE:VALE) stands against the other potash stocks.

Global Potash Market: Rising Demand, Key Players, and Future Growth Projections

Potash encompasses various minerals rich in potassium, primarily potassium chloride (muriate of potash), which dominates the global market. Other compounds like sulfate of potash make up the remainder of the market. As the world's population is expected to reach over 9.7 billion by 2050, the need for potash-based fertilizers will only continue to rise.

The agricultural sector uses more than 95% of the world's potash production, with the remainder going toward commercial and industrial goods like detergents. The US Geological Survey states that historically, a third of the world's potash supply has come from Russia and Belarus combined.

In addition to phosphate and nitrogen, potash is necessary for crop health and is vital for plant growth. However, intensive farming depletes potash reserves, making synthetic fertilizers necessary. Potash prices skyrocketed as a result of the conflict between Russia and Ukraine, reaching a high of over $1200 per metric ton in April 2022 before falling to $328 per metric ton, which is still more than pre-Covid levels. As a result, nations like the US, Brazil, and Morocco have looked for substitute suppliers to lessen their dependency on Belarus and Russia. Grants have also been issued by the US to increase regional fertilizer production. You can also see our post on the top fertilizer stocks to purchase based on hedge funds' 10 Best Fertilizer Stocks to Buy According to Hedge Funds for further information.

The global potash market was valued at USD 57.74 billion in 2022 and is expected to grow at a CAGR of 4.9% from 2023 to 2032, reaching USD 93.50 billion by 2032. The potassium chloride product segment dominated the market with a revenue share of 52.7% in 2022, driven by the surge in agricultural activities. The top 15 national fertilizer markets consume 78% of global potash, while 133 countries consume only 5%. Major players in the potash market include JSC Belaruskali, Compass Minerals, Mosaic Company, Uralkali, and Rio Tinto.

Our Methodology 

To rank the 10 best potash stocks, we first conducted sampling, and gathered potash stocks from relevant ETFs. We the narrowed down further based on high upside potential, strong buy analyst recommendations, and large market capitalizations. From this list, we then ranked the top 10 potash stocks according to the number of hedge fund holders in Q1 2024.

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter's strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).

Aerial view of a giant iron ore mine, showcasing the mineral deposits of the company's Ferrous Minerals segment.

Vale S.A. (NYSE:VALE) 

Number of Hedge Fund Holders: 34 

Vale S.A. (NYSE:VALE) is a diversified global mining company and one of the world's largest producers of iron ore, pellets, and nickel. The company also has significant operations in potash, copper, and coal. Vale has been focusing on sustainability and reducing its environmental impact. The company has set ambitious targets to reduce greenhouse gas emissions and is investing in renewable energy projects to power its operations.

Analysts are bullish on Vale's potash business due to rising global fertilizer demand driven by population growth and the need for increased agricultural productivity. Vale's acquisition of Potash One and ongoing investments in expanding and modernizing its potash operations position the company to capitalize on this demand. Vale SA has received a Moderate Buy rating from 12 Wall Street analysts based on recent forecasts. The average price target is $15.55, with a range from $12.70 to $18.00. This average suggests a potential 39.34% increase from the current price of $11.16.

In Q1 2024, there were 34 hedge fund holders in Vale S.A. (NYSE:VALE) with Fisher Asset Management holding the largest position in the company. Fisher held 16,255,974 shares in the stock worth $198,160,322, comprising 0.09% of the company’s total portfolio. Vale reported a proforma adjusted EBITDA of US$ 3.5 billion, in Q1 2024 which is 9% lower year-over-year (y/y) and 49% lower quarter-over-quarter (q/q). This decrease was primarily due to weaker iron ore fines realized prices and seasonally lower sales. The company’s capital expenditures for the quarter were US$ 1.4 billion, which is US$ 0.3 billion higher y/y. The Serra Sul 120 Mtpy project's estimated CAPEX was revised upwards to US$ 2.8 billion due to higher input and services costs

Overall VALE ranks 3rd on our list of the best potash stocks to buy. You can visit 10 Best Potash Stocks to Buy to see the other potash stocks that are on hedge funds’ radar. While we acknowledge the potential of VALE as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than VALE but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

 

READ NEXT: Analyst Sees a New $25 Billion “Opportunity” for NVIDIA and Jim Cramer is Recommending These 10 Stocks in June.

 

Disclosure: None. This article is originally published at Insider Monkey.