Well, one thing’s for certain: people will always need to eat. By 2050, there’ll be an estimated two billion extra people to feed. What’s more, the amount of land available for crop growing is falling.

As the world’s largest potash producer, Nutrien could play a big part in solving this potential crisis.

The long-term case for potash

Potash, as you may know, protects and restores soil fertility. This is increasingly important, because global populations are rising. Meanwhile, arable land is in decline.

Take India as an example. It now has a rising workforce and increased urbanization. Cities are expanding into the countryside, potentially reducing the amount of land available for growing crops.

According to the Food and Agriculture Organization, arable land per person was 0.38 hectares in 1970. This fell to just 0.23 in 2000. By 2050, it’s projected there’ll only be 0.15 hectares of arable land per person.

The problem is simple: we need to get more food from less land. And countries like India depend heavily on imports for potash. Over the next few decades, its demand will surely rise.

Why Nutrien looks well equipped to meet this demand

Annually, it produces 25 million tonnes of potash, nitrogen, and phosphate products.

Its potash deposits produce a 73% gross margin per manufactured tonne. What’s more, it has the capacity to increase these supplies by another five million tonnes if needed.

Nutrien has other advantages on its side, too.

For instance, it offers 1,850 proprietary agricultural products. This includes patented technologies in crop nutrients, crop protection, and seed. It produces the market’s leading controlled-release nitrogen product. These patented technologies offer a strong competitive moat. It should be harder for rival companies to steal market share.

And it’s not just a fertilizer company.

Nutrien also provides data analytic software to help farmers make more efficient decisions. I find this particularly appealing, because it offers some protection from changing commodity prices.

Why Nutrien could be good value right now

Over the past year or so, Nutrien has faced some headwinds.

First, there was record rainfall in 2019. This prevented 20 million acres from being planted and fertilized. In Australia, a drought hit wheat yields, reducing supply roughly 20%. All of this had a negative impact on Nutrien’s 2019 revenues.

The Indian government has also cut its potash subsidy to the lowest in 10 years. This may cause some short-term problems, because farmers’ imports will be more expensive.

To add to this, you have the recent coronavirus market crash, which dragged Nutrien even lower.

However, Nutrien could now offer terrific value for long-term investors.

For starters, it’s now trading below its book value. Unlike many dividend stocks, its debts are not excessive. Shareholder equity is more than double Nutrien’s long-term liabilities. For this reason, I consider its dividend to be relatively secure.

And that’s food for thought when you consider Nutrien now yields almost 5%.

The post Why Now’s the Time to Feed Your TFSA With Nutrien (TSX:NTR) appeared first on The Motley Fool Canada.

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As a royalty and streaming company, Franco Nevada provides gold miners with capital to develop new projects. In return, they receive either a royalty (a percentage of the revenues) or a streaming deal (the right to buy the mined gold at a favourable price).

You can think of it as having a big, fat call option on gold. When prices rise, their margins can rapidly grow.

A “Goldilocks” business model?

Here’s what’s most astonishing about Franco Nevada.

It has a market capitalization of $33.5 billion, yet only has 38 full-time employees. That is almost a billion dollars of market cap per employee!

It is hard to imagine how any other business model could be this efficient. Even Amazon has significantly less market cap per employee.

Or compare it to any large gold miner.

On a big mine, you might expect to see the monstrous $5.5 million Caterpillar 797 truck. Each tire for this vehicle costs $42,500!

Franco Nevada deals with none of these logistical headaches. It simply assesses the opportunity and decides whether or not to invest.

Physical gold is only getting harder to find

Due to the coronavirus, a number of miners are temporarily closed.

Many of the major mines are closed also.

It’s causing the premiums on physical gold to explode. Meanwhile, miners are having to cover their unavoidable overheads while revenues are slashed. Of course, this poses some risk for Franco Nevada, but I believe those risks are outweighed by the rewards.

For starters, Franco Nevada (as reported in November 2019) has 374 well-diversified assets, most of which are in safe jurisdictions across Canada, the U.S., and Latin America.

What’s more, you’d expect Franco Nevada to benefit from higher prices once the mines are back online.

How risky is Franco Nevada?

I think a sensible answer is, “riskier than bullion, but less risky than miners.”

If you’re looking to hedge your TFSA, you might take a closer look at Franco Nevada.

Its debts are miniscule, with a debt/equity ratio of 0.02. It also has $172.5 million of free cash flow.

In terms of its track record, Franco Nevada is a marvel. Since its inception in 2008, it has produced a better-than-average 16% annual return. Canadian IPO investors are now realizing a 9.3% dividend yield. Remember, that’s including the vicious gold bear market, which began in 2011.

Unfortunately, this track record has not been overlooked by the markets. Shares are by no means cheap, and you’ll pay a premium for the relative safety.

I would also expect more upside from miners like Barrick Gold — if you can stomach the risk.

On balance, if I had no gold bullion, I would probably consider putting 3-5% of my TFSA into Franco Nevada.

The post Gold Alert: Is Franco Nevada (TSX:FNV) a “Goldilocks” Stock to Buy and Hold? appeared first on The Motley Fool Canada.

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Even a modest rise in gold prices can have a tremendous impact on its bottom line — and oil is one of Barrick’s biggest expenses.

Its profits could potentially explode.

Lots to like about Barrick — even before this happened

In 2011, when gold hit its U.S. dollar peak, Barrick was $52-per-share at writing — then gold crashed and Barrick followed, plunging as low as $8.50. Today, at roughly $40, Barrick is still an amazing bargain.

Its balance sheet is in better shape than it was 10 years ago, and debts have been dramatically reduced. Today, you’re buying a stronger company. What’s more, the amount of currency printed (a big driver in the price of gold) has skyrocketed.

The Bank of America recently predicted $3,000 gold within 18 months.

That’s about 50% higher than its 2011 peak. And remember, that’s not a statement from a gold bug: That’s the Bank of America.

You can print more dollars, but you can’t print gold

That’s why gold is only getting more attractive.

Over the long term, gold has proven itself a safe store of value.

With miners like Barrick, your potential upside is even higher because a modest rise in prices can multiply its profits. I explained this in a recent article on Pan American Silver.

Suppose it costs $1,000 to dig up one ounce of gold. Right now, you can sell that ounce for about $1,700 — a $700 profit.

Now, suppose prices did rise 76% to $3,000. The miner’s profits would increase $2,000 – a 185% profit boost.

Admittedly, during the recent crash, gold declined, and it could happen again. However, it’s important to know why gold went down. It’s not for the same reason as stocks.

During a market crash, traders and hedge funds are scrambling for cash to meet margin calls. Gold is a highly liquid asset. They can usually find a bid, so they sell.

After falling, gold quickly rebounded, as did the miners. Barrick hasn’t been this high for seven years! Meanwhile, the Dow Jones Industrial Average and the S&P500 averages haven’t even come close to a recovery.

Coronavirus could be another short-term risk

However, Barrick has over a billion dollars of free cash flow. Its assets are diversified all over the globe. In short, I expect it to weather this storm.

And don’t forget, the gold in those mines isn’t going anywhere. It has been underground for a few billion years. It’s not going to suddenly get up and run away.

As I see it, Barrick Gold is the quintessential Foolish investment.

It has a track record of surviving tough markets. And I believe gold is just getting warmed up for a long-running trend higher.

The post Gold Bumps and Oil Dumps: Is Barrick Gold (TSX:ABX) a Screaming Buy? appeared first on The Motley Fool Canada.

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What makes uranium unique?

As you probably know, uranium is used to fuel nuclear power plants.

Utility companies know well in advance how much they’ll need. So, producers can lock down higher prices with long-term contracts.

Even with rock-bottom spot prices, these contracts help miners like Cameco stay afloat. Meanwhile, utility companies enjoy predictable costs.

Now, here’s where it gets interesting: most of these contracts either have expired or will expire soon. Due to low prices and, more recently, coronavirus, many mines have suspended.

Is a supply shock inevitable?

According to Swiss Resource Capital, only 90% of demand can be met from producing mines. This was written in 2019, before coronavirus. And it doesn’t count the upcoming demand from emerging markets.

China is the biggest electricity consumer. Yet nuclear power only generates 4% of its demand. China wants to increase this to 28%. Over the next 15 years, it is expected to build +80 new reactors. And that’s just one country.

India is also rapidly expanding into nuclear energy.

“Either prices go up or the lights go out”

Of course, the lockdowns might end. Miners could soon resume digging.

But why would they with prices this low?

Cameco has been buying uranium in the spot market to fulfill its contracts. Why? Because it’s cheaper. Cameco suspended its McArthur River mine long before coronavirus. Above-ground supplies are dwindling.

And these mines are highly concentrated. Just four countries supply roughly 75% of the market.

Considering all this, it’s hard to imagine how prices could possibly fall.

As commodities expert Rick Rule said on Bloomberg in 2018, “If prices don’t go up, the lights go out.”

Why Uranium Participation?

I don’t know about you, but I’m tired of worrying about the impacts of coronavirus.

I just want a straightforward investment that I can buy, hold, and not think about.

Uranium Participation holds physical uranium. It adjusts supplies based on its share price and net asset value (NAV). For example, if shares are trading a premium to NAV, Uranium Participation might issue new shares, then use the funds to buy more uranium. It’s dead simple.

This lets you invest in physical uranium without the risks of mining or exploration.

Operating expenses account for less than 1% of working capital.

And you can often catch shares at a discount to NAV. Last month, it reported a fair asset value of $696 million. This works out to $5.04 per share.

Theoretically, if you can buy shares for less, you’re getting a good deal. And if uranium prices rise, you could be getting a very good deal.

As for me, I bought a bunch of shares in my TFSA. I don’t know when I’ll sell. Maybe not for 20 or 30 years. Prices should be significantly higher by then. If they’re not, then I guess we’ll all be in the dark.

The post How to Profit From Uranium Going Nuclear appeared first on The Motley Fool Canada.

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From February, shares have fallen 44% and still haven’t fully recovered.

But how might COVID-19 affect businesses that use Shopify? Can this stock ever see a lasting rebound?

What’s to like about Shopify?

The best reason to own Shopify is also the simplest: it addresses an excruciating problem with a genuinely excellent solution.

You cannot understate the value of this — especially when times are hard.

Businesses are cutting costs wherever possible. They’re having to adapt, with improvised services like roadside pickup.

From a modest $29-per-month, Shopify relieves a huge burden. Its platform makes it (almost) effortless to sell online. It can manage inventory and crunch data. It frees struggling businesses that haven’t the time, resources, or expertise to do this stressful work on their own.

In short, the benefits of Shopify should far outweigh the costs.

It is the easiest, most comprehensive solution to sell online.

Still, don’t expect COVID-19 to help Shopify in the short term

It almost certainly won’t.

Revenues will probably be crushed.

That’s because many businesses using Shopify appeal to impulse buying. They sell discretionary items that people can live without. During a downturn, these businesses suffer the most.

Also, much of Shopify’s revenue comes from customers using premium packages. Even those who survive may downgrade their subscriptions. I’m expecting the months ahead to be painful.

But what about its long-term prospects?

Interestingly, Shopify extended its free trial from 14 to 90 days. This could prove smart.

Imagine you’re a small-business owner. You’re looking for any lifeline to help you through the coronavirus lockdown. Why not try Shopify’s 90-day trial? What can you possibly lose?

This could work a bit like the “Pepsi Challenge.” Those who try Shopify will never go back to their old ways.

Will COVID-19 change shopping habits forever?

This is pure speculation, but it’s worth thinking about.

When people experience a sudden shock, like the coronavirus, it’s normal for habits to permanently change. (I often think of my grandmother, who grew up on WWII rations. She still keeps eight bags of sugar in the kitchen.)

Even if discretionary spending does return, it’s unlikely to happen overnight.

Shopify may need to attract more essential businesses that people really need.

Personally, I can see many glimmers of hope. The Ontario Cannabis Retail Corporation (if you class cannabis as “essential”) announced it would use Shopify for online sales.

You also have the millennial shopper to consider.

The Financial Times reported millennials are now “the most powerful spenders.”

A recent study found 61% of millennials prefer to support local businesses. Their biggest reason was wanting to help the community. And Shopify makes it easier for local businesses to serve and market to these customers.

Shopify could offer you exposure to thousands of local brands that aren’t trading on the stock market.

Is Shopify a buy?

I believe Shopify will do well over the long term.

If you can stomach the stress, you might consider buying now. However, I’d expect a bumpy road ahead, as its users struggle to stay afloat.

It’s also worth noting that Shopify was a Wall Street darling before the crash. It was, in my opinion, ludicrously overvalued. Shares still look expensive, which is a worry if you believe this market crash has only just begun.

Another concern is the bottom line. Despite phenomenal revenue, Shopify has struggled to generate real cash profits. It does have $650 million of cash and cash equivalents, which, with careful spending, will hopefully see it through this crisis.

Its balance sheet is also in good shape, because it has sold shares to finance activities (rather than load up on debt).

However, I can’t get past the valuation. As far as Shopify’s stock price has dropped, I am, sadly, still kicking myself.

The post Could Shopify (TSX:SHOP) Stock Soar in a Post-Coronavirus World? appeared first on The Motley Fool Canada.

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Even conservative investments take short-term hits, and Algonquin Power & Utilities (TSX:AQN)(NYSE:AQN) is no exception. It recently fell 43% from its 12-month high and now boasts a 4.5% dividend yield.

This could be a rare opportunity to grab some income and enjoy future growth.

But is this stock right for your portfolio? And, if so, should you be buying now?

The worst is hopefully over for Algonquin Power & Utilities

Utilities are generally seen as “defensive” stocks, because they provide a necessary service.

No matter what happens to the economy, we all need electricity. We all need water. So, you can expect relatively stable revenues and consistent dividends. That has been the case for Algonquin Power & Utilities.

It owns a diversified basket of assets across electric and natural gas utilities, water and water-waste utilities. Not to mention a rapidly expanding footprint in renewable energy.

Operating cash flow has increased steadily for over five consecutive years, which has been matched with rising dividends. On February 27, it announced an annual $0.56-per-share dividend — higher than the industry average.

You can also reinvest your dividends for a further 5% discount on new shares.

Another (overlooked) reason I expect this stock to outperform

Algonquin Power & Utilities has invested heavily in wind, solar, and hydroelectricity.

Obviously, it’s smart to address growing environmental concerns. But it does something else that’s often overlooked.

It also makes the company’s debts easier to manage.

Unlike oil and other commodities, renewable energy has stable prices. It means Algonquin Power & Utilities can expect a more predictable net income. They can plan for the future with fewer uncertainties.

Utility companies tend to have a lot of debt (one of the few things I don’t like about this stock). However, debt is easier to stomach when you know the management is taking it seriously.

Algonquin Power & Utilities is aiming to keep a BBB credit-rating. Its net income covers interest payments three times over. Its debt to capital is 47.82%, which is lower than the industry average.

As Algonquin Power & Utilities finds it easier to manage debt, I think it should outperform other utility stocks even more.

Should you buy Algonquin Power & Utilities?

I’m with my fellow Fools who believe this bear market still isn’t over.

Now is not the time for wild, speculative bets.

It’s time to play defence. To protect your savings with proven, stable companies that can offer you a fair return. I’m expecting Algonquin Power & Utilities to keep doing this for the foreseeable future.

It’s a well-run company with a decent dividend. And it’s getting an impressive return on new investments. Last year saw its return on equity soar to 15.63%.

Could you find a higher dividend elsewhere?

Sure. But at least this dividend looks safe. There’s no point buying a stock for a high dividend yield, only to find it gets cut in a recession.

Could the share price fall some more?

Of course. Anything could happen. But I’m not too worried about these dips. If anything, I’m grateful to get more shares at a discount when the dividends are reinvested.

Over the long term, it’s a no-nonsense stock which you can leave humming along in your TFSA for years to come.

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That is almost one-third of all the Allied oil used to fight World War II. It’s enough oil to drive your car non-stop for a million years.

However, before you “buy-the-dip” on pulverized oil stocks, remember this is a freak market. Many producers can, and likely will, go bankrupt.

Here are three creative ways to strike this opportunity, hopefully without going bust:

Oil storage companies

Cutting oil production isn’t easy. It’s not like turning off a tap.

And you don’t want to pump oil into a market full of low-bidders.

This could be a huge tailwind for Gibson Energy. It owns almost 12 million barrels of storage, plus 500 km of crude pipelines.

A quarter of all Western Canadian crude passes through Gibson Energy, and I’d expect that demand to increase.

Some analysts are even suggesting negative oil prices. (Yes, producers could get so desperate, they actually pay customers to take their oil!) Gibson’s storage allows producers to hide until prices rise.

Oil companies that own complete supply chains

Exploration is expensive. It takes a lot of capital and tends to involve debt.

However, refineries are easier to manage. You take profits by turning crude oil into petrol. You’re less dependent on higher prices.

And what if you also own 1,500 gas stations?

Well, now you control the entire supply chain. You can make adjustments and focus your capital wherever it’s most efficient.

It’s for these reasons you cannot ignore Suncor.

Suncor has a monster list of assets from oil sands and refineries, all the way down to Petro Canada gas stations. Share prices are still down over 50% from their 12-month high.

If you’re looking for an oil stock to hold, now might be a good time to consider Suncor.

Oil tanker stocks

Land storage is almost completely exhausted.

It could prove good news for companies like Algoma Tankers. As the oil glut worsens, tankers are storing more surplus barrels.

Rates are already rising, with some tankers said to be earning over $100,000 a day.

The longer this drags on, the more you stand to profit.

And it seems Algoma’s management believe there’s even more potential ahead. Last year, they greedily bought back shares, a clear signal that they expect valuations to rise.

Conclusion

If you’re investing in oil, this could be a once-in-a-lifetime buying opportunity.

Focus on big companies with plenty of assets. This can help them survive, perhaps even thrive, through the oil shock.

Personally, I would avoid pure U.S. shale producers. Many of them need oil prices at $40-$90 just to break even. Of course, they may be rescued with government bailouts. However, that would only make me more convinced that the U.S. dollar is going down.

Also, many oil companies have mouthwatering dividend yields. But take this with a pinch of salt.  They are on the ropes and will need a lot of cash to pull through. You shouldn’t be surprised if dividends are cut.

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Well, if you’re measuring it against gold, silver has never been this cheap. The gold/silver ratio recently exploded past 120. Theoretically, that means you could buy 120 ounces of silver for one ounce of gold.

An average gold/silver ratio is about 70, and it has been as low as 15.

120 is unheard of. This has never happened in all of human history.

If silver prices rise, I believe one Canadian miner, Pan American Silver (TSX:PAAS)(NASDAQ:PAAS), could be well positioned for the spoils.

Admittedly, the gold/silver ratio is not foolproof

You could argue that gold is too expensive, and that’s why silver looks cheap.

However, in U.S. dollars, gold is still well below its 2011 high. Now, it looks like we’re heading into a similar financial crisis. Central banks are printing trillions more currency than during the last recession.

If anything, I believe gold is also cheap.

It’s just that silver is really, really cheap.

You could also argue that silver is an industrial metal and won’t be in high demand through a recession.

But like gold, silver has been used as money since the ancient times. When gold rises, silver tends to play catch-up with parabolic moves.

During the last financial crisis, silver shot up nearly 400%.

Meanwhile, silver is capitalizing on many growing trends. It’s the most conductive metal, making it vital for electric technologies. Solar panels also account for its largest industrial demand.

If you want to buy physical silver, good luck

You can’t find it anywhere.

From what I can see, dealers haven’t a single ounce to sell. And because of the coronavirus, many of the major mints are closing, too.

With such desperate silver shortages, you might be wondering: “Why are prices so low?”

I believe silver’s spot price was pushed down by paper-traders who needed cash as stocks plunged. They weren’t selling physical silver but paper claims to silver.

If you want the real thing, you can expect to pay double the spot price — if you’re lucky.

As more people demand genuine silver, prices must surely rise.

Silver miners are digging up real, hold-in-your-hands silver

When prices move, even a little, it has a dramatic impact on silver miner’s profits.

Suppose it costs a miner $8 to dig up one ounce of silver. They can sell that ounce for $10. That’s a $2-per-ounce profit.

Now, what if that price went up 100% to $20?

The miner’s margin would jump to $12 — a profit boost of 500%!

This is why, if you believe precious metals are going up, miners are so compelling. You get even more leverage on the price.

Why I’m watching Pan American Silver

Mining companies are notoriously volatile.

You want to own large, well-run companies, with solid balance sheets and low mining costs. That way, you shouldn’t need high silver prices. You can hold onto your shares while they’re cheap.

Pan American Silver is the second-largest primary silver producer, with a $5 billion market cap and well-diversified assets across Mexico, Canada, Peru, Argentina, and Bolivia.

Its Escobal mine is one of the largest silver deposits in the world, with an estimated 264 million ounces of reserves.

And it doesn’t just mine silver. Extra revenue is generated from gold, zinc, lead, and copper.

Its balance sheet looks strong. Debts are a conservative 0.12 of assets, with $282 million in operating cash flow.

At 1.44 times book value, shares aren’t exactly at bargain-basement levels. However, it’s a solid, well-run company that I’d be happy to hold long term.

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The Dow lost all of its post-Trump gains and the Russell 2000 index plunged almost 40% in four weeks. But if you’re thinking now is a good time to buy, you may want to think again.

Despite these losses, U.S. stocks still look massively overvalued in my opinion – for one very good reason:

The dollar cannot stay this high forever

While stock markets crashed, the U.S. dollar surged against virtually all currencies.

Why?

Source: TradingView.com

For starters, big institutions and traders are having to meet ‘margin calls’. That is: pad their accounts with collateral against falling dollar-based assets.

This demand for dollars is only temporary.

Another reason could be the dollar’s reputation as a ‘safe haven’ currency. Historically, when the sky is falling, this is the place to run. But that reputation now looks shaky.

U.S. Federal debts are $23.5 trillion – more than double 2008 levels.

Meanwhile, the Federal Reserve is pumping trillions of new dollars into the markets.

Even if S&P 500 stocks are now cheap (and I don’t think they are), the dollar has never looked so risky. Buy now and you could suffer a double crash – first in stocks, then in currency.

There are some wonderful U.S. companies. My favourites are Disney, Waste Management, Starbucks. I would love to own these stocks, and I believe a time will come to buy.

However, no matter how far they’ve fallen, I don’t think that time is now.

Where to buy instead?

Currency could play a much bigger role in this crash.

Central banks are experimenting with extreme policies that have never been tried before. So instead of the S&P 500, I’m focusing on emerging markets, whose currencies have already been hit, and could benefit from a falling dollar.

India offers some extraordinary long-term opportunities, because the population is so young. Corporations aren’t saddled with pensions like those in western nations.

India is the only major economy with a growing workforce and increased urbanization. It means more wealth going around the economy. And because cities are growing, productivity is rising too.

What happens in India today or tomorrow, I’m not certain. As for the long term, I expect India to roar with a new wave of prosperity. This is like investing in America back in the late 1970s.

Don’t forget commodity countries, either

Commodities have been clobbered all through this bull run.

Then came the recent oil shock. Again, commodities were kicked while they were down. It’s hard to imagine an area that’s more unloved, battered and bruised.

Which is why I think commodities could have a very bright decade ahead.

One stock I’m watching closely is Lundin Mining (TSX:LUN), a well-run Canadian copper miner with a very strong balance sheet.

Lundin’s liabilities are low, with a debt/equity ratio of 0.06. As I write this, it is even trading at a price/book ratio of 0.60. Broadly speaking, it means this stock could be seriously undervalued. You are effectively getting a dollar of assets for every 60 cents you invest.

And remember: those are Canadian dollars that aren’t being propelled to unsustainable heights. I feel safer there than anywhere in the U.S.

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