2 Safety Nets to Buy as Recession Shockwaves Intensify

Investors can seek safety in two resilient commodity stocks amid recession shockwaves.

| More on:

Market analysts predict that shockwaves to commodity flows will intensify in the back half of 2022. Almost everyone from governments and businesses to consumers are under pressure to cope with soaring prices. The TSX hasn’t closed above 20,000 in 10 consecutive days, although the index managed to gain 0.70% last week.

Thus far, two commodity stocks display tremendous resiliency, as a recession knocks on the door. On June 24, 2022, Verde Agritech (TSX:NPK) and First Quantum (TSX:FM) advanced 6.75% and 11.50%, respectively.

First-mover advantage

Verde Agritech remains the TSX’s top price performer in 2022 amid the massive headwinds. At $7.91 per share, the trailing one-year price return is 600%, while the year-to-date gain is 183%. Had you invested $6,000 in the stock a year ago and held it in a TFSA, your tax-free gains today would be $36,000.

The $410.79 million Brazil-based agricultural technology company is a producer and seller of multi-nutrient potassium fertilizer. In Q1 2022, revenue and sales volume increased 1,260% and 574% versus Q1 2021. Net profit for the quarter was $3.03 million compared to the net loss of $1.81 million in the same quarter last year.

Cristiano Veloso, Verde’s founder, president, and CEO, said, “2022 has started in a very shaky manner for the agricultural market globally. In Brazil, which depends on imports for over 96% of its potash supplies, the concern with fertilizers has been at the forethought of most farmers.”

Veloso added, “Verde’s target towards the delivery of 1,000,000 tons by the end of 2022 is further boosted by these latest results.” For 2023, management’s sales volume target is two million tons, or 43% higher than the original guidance of 1.4 million tons. 

Based on published reports, Veloso exercised his stock options and increased his ownership in the company to 18.36%. Verde Agritech has a first-mover advantage with its Bio Revolution technology. The technology will help the company achieve its goal of becoming the global leader with a cost-efficient platform for adding microorganisms to agriculture.   

Strong pricing environment

First Quantum has done well in 3.01 years, rewarding investors with a total return of 117.04% (29.35% CAGR). Because of its 11.5% advance last Friday, the year-to-date loss has been reduced to 14.5%. Market analysts’ 12-month average price target is $43.64, or a 68.6% appreciation from its current share price of $25.88.

This $17.9 billion company develops and produces mineral properties, primarily nickel, pyrite, zinc ores, gold, silver, and copper. The operating mines are in Australia, Finland, Mauritania, Panama, Spain, Turkey, and Zambia. Currently, First Quantum benefits from the strong commodity pricing environment.

In Q1 2022, management reported 33.3% and 55.8% increases in sales revenues and net earnings versus Q1 2021. Higher realized metal prices offset the lower copper and gold sales volumes plus inflationary cost pressures.

Its chairman and CEO Philip Pascall said, “Despite the operational and inflationary challenges presented in the first quarter, First Quantum was able to deliver another quarter of strong earnings and demonstrate continued financial improvement.” 

Safety nets

Many stocks, regardless of sector, face an acid test should the global gas and food crises escalate. However, Verde Agritech and First Quantum are profitable safety nets for risk-averse investors.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Christopher Liew has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

More on Metals and Mining Stocks

Concept of multiple streams of income
Stocks for Beginners

Lock Up This 9.2% Dividend Yield From a Top Royalty Stock

Royalty stocks have a strong advantage when it comes to creating passive income for investors. But this one has the…

Read more »

Safety helmets and gloves hang from a rack on a mining site.
Metals and Mining Stocks

Is First Quantum Minerals Stock a Good Buy Right Now?

First Quantum is a TSX stock that trades 61% below all-time highs. However, the mining stock still trades at a…

Read more »

nugget gold
Metals and Mining Stocks

The Best Gold Stock to Invest $1,000 in Right Now

Here are two of the best Canadian gold stocks that can yield some eye-popping returns in the long run.

Read more »

nugget gold
Stocks for Beginners

The Ultimate Mining Stock to Buy With $1,000 Right Now

This mining stock just saw a drop, but don't let that keep you from diving in. This miner is due…

Read more »

A plant grows from coins.
Metals and Mining Stocks

Canadian Mining Stocks: Buy, Sell, or Hold?

Explore 2025’s top Canadian mining stocks – gold, uranium, and base metals offer big potential in a dynamic, commodity-driven market.

Read more »

farmer holds box of leafy greens
Metals and Mining Stocks

3 Reasons to Buy Nutrien Stock Like There’s No Tomorrow

Nutrien stock has lost 34% of its value just this year alone and looks incredibly cheap today. Yet, secular trends…

Read more »

Canada national flag waving in wind on clear day
Tech Stocks

Trump Trade: Canadian Stocks to Watch

With Trump returning to the presidency, there are some sectors that could boom in Canada, and others to watch. But…

Read more »

Super sized rock trucks take a load of platinum rich rock into the crusher.
Metals and Mining Stocks

Invest $7,000 in This Dividend Stock for $672 in Passive Income

High yield can be an essential requirement when you need to start even a modestly sized passive income with a…

Read more »