With the United States election over, investors are left figuring out which stocks and sectors they should invest in for the coming months. Most of the interest and capital are focused on the technology sector as momentum chasers step on the gas; however, a new trend is about to flip the script.
This trend creates new upside potential for the United States economy in the domestic manufacturing sector, which is an underlying proposal from the new administration. Investors must understand that the market is already behaving as if this were a reality today.
Price action in basic materials stocks like United States Steel Co. (NYSE: X), whose shares rallied by over 8% the morning after the election, reveals the next step. This next step will include agricultural and manufacturing stocks, which have been sitting on the sidelines, such as Deere & Co. (NYSE: DE), Mosaic Co. (NYSE: MOS), and CF Industries Co. (NYSE: CF).
Why Short Sellers Are Running From Deere Stock Today
Over the past month, short interest in Deere stock declined by over 11.2%, showing investors enough signs of bearish capitulation to consider a bullish case of their own. Now, to replace these short sellers, new institutional buyers have flooded the scene to help Deere stock’s renewed upside.
Leading the way recently were those at KBC Group, who boosted their position in Deere stock by as much as 10.9% as of early November 2024. This new allocation brought their holdings in the company up to $42.5 million today, and the timing of the transaction begs the question of whether the evidence for a rally was more apparent today than ever.
Wall Street analysts, particularly those at Truist Financial, might be able to answer that question. After reiterating their Buy rating, these analysts also pushed valuations for Deere stock as high as $496 a share, a significant boost from their previous $443 price target.
To prove these new views right, the stock would have to rally by as much as 23% from where it trades today, not to mention get to a new high for the year. This would add further pressure for the bears to close their short positions and further buying pressure on the company.
Analysts Forecast Strong Double-Digit Gains for Mosaic Stock
Fertilizer and chemical stocks have underperformed as the domestic manufacturing and agricultural cycle has declined. However, after a 15.5% decline for the past 12 months, Mosaic stock faces new double-digit upside projections from Wall Street analysts today.
The company's high valuation range is set at $48 a share, calling for up to 74% upside from today’s price to show significant outperformance potential compared to other propositions in this new cycle. According to Mosaic’s latest investor presentation, a catalyst might already be underway to bring investors closer to these price targets.
The price of fertilizers and other chemicals is now at its cyclical lows, while demand in Asia and South America is beginning to tick up higher. With low prices, the supply hasn’t been expanding as producers have no incentive to profit, which creates a double tailwind for Mosaic’s margins in the coming months.
Even if this trend takes a little longer to play out, Mosaic shareholders can count on the company’s $0.84 a share payout, which calls for a dividend yield of up to 3% today. While enough to beat inflation, the dividend is not a factor investors should focus so much on; rather, they should look at the new institutional buying activity.
Particularly noteworthy are the new buys from Versor Investments, which more than tripled as of November 2024 to reach a high of $2.3 million. That new allocation is a drop in the bucket, though, as up to $1.3 billion of institutional capital made its way into Mosaic stock over the past 12 months.
CF Industries Stock Primed for a New Rally, Here’s Why
If Mosaic is right about its projections for crop and fertilizer demand in the coming quarters, then CF Industries stock will likely see a spillover effect from the tailwind, and Wall Street analysts are willing to bet on this.
Investors can see this through the bold projections made by the Royal Bank of Canada, where analysts not only reiterated their Outperform rating on CF Industries stock but also boosted their price targets to a high of $100 a share. This new view suggests the stock has enough room to deliver a rally of up to 21% from today’s price.
Being in front of a potential double-digit rally sent some bearish traders home. CF Industries stock’s short interest collapsed by over 23% in the past month alone, amplifying a quarterly downtrend. As is apparently common in all of these names, institutions also found enough reasons to start buying the stock recently.
Buyers from International Assets Investment Management decided to boost their exposure in CF Industries stock to $375.4 million today, making them one of the biggest institutional holders of this agricultural stock betting on the new price rally.
