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The materials sector includes companies engaged in the discovery, development, and processing of raw materials, which are used across a broad range of sectors and industries. Materials stocks include manufacturers of products as varied as plastic, fertilizer, paper, concrete, and metals. Prominent names include Ecolab Inc. (ECL), Air Products and Chemicals Inc. (APD), and DuPont de Nemours Inc. (DD).
Materials stocks, represented by the Materials Select Sector SPDR ETF (XLB), have outperformed the broader market. The XLB’s total return was 96.1% over the past 12 months, beating the Russell 1000’s total return of 79.4%, as of March 22. All statistics in the tables below are also as of March 22.
Here are the top 3 materials stocks with the best value, the fastest growth, and the most momentum.
These are the materials stocks with the lowest 12-month trailing price-to-earnings (P/E) ratio. Because profits can be returned to shareholders in the form of dividends and buybacks, a low P/E ratio shows you’re paying less for each dollar of profit generated.
Source: YCharts
- Huntsman Corp.: Huntsman is a manufacturer of specialty chemical products, including textile chemicals, dyes, and advanced polyurethane-based formulations. For Q4 2020, Huntsman’s net income increased 16.9% year-over-year (YOY) as revenue rose less than 1 percent during the period.
- Celanese Corp.: Celanese is a global chemical and specialty materials company. It produces materials that are critical to the global paints and coatings industries, as well as products used in industries including automotive, medical, food, and beverage products.
- MDU Resources Group Inc.: MDU Resources Group provides energy distribution, construction materials and services to U.S. customers. Its Q4 2020 income from continuing operations rose 18.2% YOY, helped by lower natural gas costs. Revenue increased by only 0.5%.
These are the top material stocks as ranked by a growth model that scores companies based on a 50/50 weighting of their most recent quarterly year over year (YOY) percentage revenue growth and their most recent quarterly YOY earnings-per-share (EPS) growth. Both sales and earnings are critical factors in the success of a company. Therefore ranking companies by only one growth metric makes a ranking susceptible to the accounting anomalies of that quarter (such as changes in tax law or restructuring costs) that may make one or the other figure unrepresentative of the business in general. Companies with quarterly EPS or revenue growth of over 2,500% were excluded as outliers.
Source: YCharts
- Southern Copper Corp.: Southern Copper explores, develops, and produces copper. The process also produces by-products including molybdenum, silver, zinc, and other metals. It conducts exploration activities in Argentina, Chile, and Ecuador.
- Nucor Corp.: Nucor manufactures steel and steel products. It also produces direct reduced iron that is used in the company’s steel mills. Most of its facilities and customers are in North America. Nucor’s Q4 2020 net income attributable to shareholders nearly quadrupled to $398.8 million even as sales grew by only 2.5% YOY. The giant increase in net income was fueled, in part, by a net benefit from items such as state tax credits and the CARES Act.
- Royal Gold Inc.: Royal Gold acquires and manages precious metal streams and royalty interests. The owner of a precious metal stream has the right to purchase metals produced by a mine at a pre-arranged price, and royalty interests are ownerships in mining projects that provide a percentage of revenue or the metals produced from the project. As of Dec. 31, 2020, Royal Gold owned interests on 189 properties on five continents. For its fiscal Q2 2021 ended Dec. 31, net income attributable to shareholders grew by nearly 45% YOY. A 28.1% revenue increase was primarily driven by increased commodity prices and higher production in its royalty division.
These are the materials stocks that had the highest total return over the last 12 months.
Source: YCharts
- Freeport-McMoRan Inc.: Freeport-McMoRan is a leading international mining company focused primarily on copper, gold, molybdenum. It owns significant reserves of these metals. The company’s Q4 2020 revenue increased by 14.9% YOY and net income attributable to common stock soared nearly 79 times to $708 million. Adjusted net income attributable to common stock was lower, totaling $566 million, after adjusting for items including net credits associated with a gain on sale of assets.
- The Mosaic Co.: The Mosaic Co. produces and markets phosphate and potash. Customers use its phosphate as crop nutrients and animal feed ingredients. The company’s potash is primarily used as fertilizer, but also for industrial and other applications.
- Olin Corp.: Olin manufactures and distributes chemical products, such as chlorine and caustic soda, vinyls, epoxies, chlorinated organics, bleach, and hydrochloric acid. It also makes ammunition. Olin recently made the strategic decision to sharply cut its chlor alkali capacity. The move will help the company to boost cash flow and increase its focus on higher-return projects. Olin is the leading global producer of chlor alkali.
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