Why Nutrien Stock Remains a Top Buy This Fall

Here’s why investors would be remiss to ignore Nutrien (TSX:NTR)(NYSE:NTR) stock in this current market environment.

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As far as outperforming stocks go this year, Nutrien (TSX:NTR)(NYSE:NTR) has really made an impression on the market. Indeed, Nutrien stock is up approximately 60% year to date, one of the best-performing commodities plays out there.

Of course, this inflationary environment has been favourable for commodities-oriented stocks like Nutrien. Indeed, the fact that Nutrien stock has more than doubled since pandemic lows suggests just how far this stock had previously fallen.

Of course, given Nutrien’s rise of late, one might think now may be the time to take some profit off the table. Here’s why I think that might be a bad idea, given the secular catalysts that could take Nutrien stock even higher this fall.

Favourable commodities environment bullish for Nutrien stock

Again, with Nutrien stock, it’s important to emphasize how commodity prices are likely to perform. Indeed, as a producer of potash and other minerals used in fertilizer development, Nutrien is uniquely tethered to commodities prices. In this inflationary environment, there’s a macro argument to be made to own the sector.

However, I view Nutrien as the best in its class right now. The company is well positioned in the potash sector to deliver very strong numbers. Reduced inventories and lower production coming out of the pandemic have provided strong pricing catalysts for the coming quarters.

Analysts agree. And with the expectation that demand will remain robust for everything from food to farm products, Nutrien finds itself in a sweet spot in the market other companies envy right now.

Nutrien’s production is set to receive a boost 

In this environment, Nutrien would be remiss to not raise its production levels. The company plans on doing just that.

Indeed, production is one of the only levers Nutrien can pull to enhance its earnings. Accordingly, the Saskatoon-based company is enhancing its manufacturing process by optimizing its mines. A partnership with BHP-Billiton is just one example of this. By leveraging its mines (and those of other companies), Nutrien can capture more of the market and take advantage of these higher prices.

Accordingly, there are expectations that Nutrien may eventually consolidate this sector further. Right now, I think Nutrien just needs to sit pretty where it is. This is a company in a very enviable position and is one I expect to produce bumper results in the coming quarters.

Bottom line 

There appears to be a tonne of the upside on the horizon for Nutrien, considering where fertilizer prices are right now. Furthermore, the possible collaboration with BHP is something that investors need to take into account.

Accordingly, investors looking for a top-notch pick right now may want to consider Nutrien stock.

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 Chris MacDonald has no position in any of the stocks mentioned. The Motley Fool recommends Nutrien Ltd.

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