In this article, we will take a look at the 10 best basic material stocks to buy now.
Over the last few decades, rising demand for raw materials to support infrastructure development, industrialization, and technological advancement have increased basic material providers’ volumes, pricing power, and revenue. Some of the biggest raw material producers that benefit from the continuous structural changes in global economies include BHP Group (NYSE:BHP), Freeport-McMoRan Inc. (NYSE:FCX), Dow Inc. (NYSE:DOW), and DuPont de Nemours, Inc. (NYSE:DD). These companies are capitalizing on the increased flow of investments in a variety of industries such as metals and mining, chemicals, construction materials, packaging, and forest products.
Major Catalysts in the Basic Material Sector
Amid the COVID-19 pandemic, several countries around the world are increasing infrastructure spending to prevent billions of losses due to traffic congestion, poorly maintained airports, and inefficient energy systems. In the United States, the Senate recently approved a $1 trillion infrastructure bill to repair the country’s aging roads and bridges, airports, public transit, as well as support new climate resilience and broadband network projects.
Following that, lithium producer Albemarle Corporation (NYSE:ALB) and aluminum manufacturer Alcoa Corporation (NYSE:AA) are also benefiting from the growing adoption of electric vehicles globally. In July, the world’s biggest and specialty chemicals company Albemarle Corporation (NYSE:ALB) announced a new lithium battery lab in North Carolina, where the company plans to develop better batteries for electric vehicles.
Image by Rolf Dobberstein from Pixabay
Our Methodology
Our stocks were chosen based on their fundamentals and growth prospects. We included companies engaged in the exploration and production of basic materials including copper, lithium, cement, aluminum, and steel. We also considered companies that are operating in the production of specialty chemicals and packaging materials.
The hedge fund sentiment around each stock was gauged using the data of 873 hedge funds tracked by Insider Monkey. The stocks are arranged according to the number of hedge fund holders in each company.
Why should we pay attention to hedge fund sentiment while choosing stocks? Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 86 percentage points since March 2017. Between March 2017 and July 2021, our monthly newsletter’s stock picks returned 186.1%, vs. 100.1% for the SPY. Our stock picks outperformed the market by 86 percentage points (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
Let’s now look at the 10 best basic material stocks to buy now.
Best Basic Material Stocks to Buy Now
10. BHP Group (NYSE:BHP)
Number of Hedge Fund Holders: 18
We start our list of the best basic material stocks to buy now with one of the largest mining companies in the world, BHP Group (NYSE:BHP). The Australian basic materials company primarily operates in manufacturing iron ore, silver, copper, and nickel. BHP Group (NYSE:BHP) also operates a segment engaged in crude oil and natural gas extraction.
On October 11, Bernstein and Macquarie both gave an Outperform ratings on BHP Group (NYSE:BHP), alongside price targets of A$45 and A$56 respectively.
Despite the announcement that BHP Group’s (NYSE:BHP) energy business would be merged with Woodside Petroleum Ltd, hedge funds remained bullish on the Australian mining company. Multiple hedge funds have upped their stakes in BHP Group (NYSE:BHP) as of June including Citadel Investment Group which increased its BHP shares by 238% to 434,740 worth $31.7 million. Schonfeld Strategic Advisors and Marshall Wace LLP also increased their stake in the mining company by 261% and 132%, respectively. At the end of the second quarter of 2021, there were 18 hedge funds that have positions in BHP Group (NYSE:BHP) worth $753 million.
9. ArcelorMittal (NYSE:MT)
Number of Hedge Fund Holders: 22
Luxembourg-based steel manufacturing company ArcelorMittal (NYSE:MT) ranks ninth on the list of 10 best basic material stocks to buy now. The company produces and supplies steel for a variety of applications including automotive manufacturing, construction, and energy infrastructure. In addition, ArcelorMittal (NYSE:MT) operates mining facilities in Canada, Ukraine, Brazil, Liberia, Bosnia, Mexico, and Kazakhstan. In 2020, the company was able to produce 58 million tonnes of iron ore.
On October 4, Goldman Sachs analyst Jack O’Brien maintained a Buy rating on ArcelorMittal (NYSE:MT), with a price target of EUR 42 per share.
At the end of the second quarter, 22 of the 873 elite funds tracked by Insider Monkey were long ArcelorMittal (NYSE:MT), up from 21 in the first quarter of 2021. Raiv Jain of GQG Partners, one of the largest shareholders in the steel stock, has boosted his holdings in ArcelorMittal (NYSE:MT) by 92% to 23.7 million shares worth $738 million as of September 13.
8. CEMEX, S.A.B. de C.V. (NYSE:CX)
Number of Hedge Fund Holders: 23
Mexican cement producer CEMEX, S.A.B. de C.V. (NYSE:CX) ranks eighth on the list of 10 best material stocks to buy now. The cement maker sells ready-mix concrete and constructions materials globally.
On October 11, Citi analyst Andres Cardona upgraded CEMEX, S.A.B. de C.V. (NYSE:CX) to Buy from Neutral, with a $9.30 price target, citing the 27% fall from recent highs of the share price as an excellent opportunity to buy the cement stock.
CEMEX, S.A.B. de C.V. (NYSE:CX) grew its revenue by 25% year over year to $3.9 billion in the second quarter of 2021 driven by higher volumes and prices across all of its products globally.
CEMEX, S.A.B. de C.V. (NYSE:CX), along with BHP Group (NYSE:BHP), Freeport-McMoRan Inc. (NYSE:FCX), Dow Inc. (NYSE:DOW), and DuPont de Nemours and Company (NYSE:DD), is one of the basic material providers benefiting from rising raw material prices.
At the end of the second quarter of 2021, 23 hedge funds in the database of Insider Monkey held stakes worth $601 million in CEMEX, S.A.B. de C.V. (NYSE:CX), down from 24 hedge funds in the previous quarter worth $471 million.
7. Albemarle Corporation (NYSE:ALB)
Number of Hedge Fund Holders: 28
Albemarle Corporation (NYSE:ALB) is a North Carolina-based lithium producer that ranks seventh on the list of 10 best material stocks to buy now. The company has been in the business of chemical manufacturing and lithium battery production since 1887 and has established operations internationally including Europe, Western Australia, the Middle East, East Asia, and Chile. Albemarle Corporation (NYSE:ALB) is one of the world’s biggest suppliers of lithium batteries for electric vehicles.
Albemarle Corporation (NYSE:ALB) is also a good stock to buy for income investors as the company currently pays its shareholders an annual dividend of $1.56 per share and offers a dividend yield of 0.73%.
On October 4, investment bank Loop Capital kept a Buy rating on Albemarle Corporation (NYSE:ALB) and increased its price target for the stock to $280 from $253.
6. Celanese Corporation (NYSE:CE)
Number of Hedge Fund Holders: 37
One of the biggest acetyl products manufacturers in the world, Celanese Corporation (NYSE:CE) ranks sixth on the list of 10 best material stocks to buy now. The Texas-based chemical and specialty materials company supplies polymers for medical, industrial, automotive, and consumer electronics applications. In addition, the chemical company produces preservatives and sweeteners.
Celanese Corporation (NYSE:CE) continues to actively explore acquisitions despite providing chemicals and specialized materials in practically every industry. In June, the chemical company announced its acquisition of Exxon Mobil Corporation’s (NYSE:XOM)’s Santoprene business for approximately $1.15 billion. The deal is anticipated to close in Q4 2021.
On October 5, Wells Fargo analyst Michael Sison kept an Overweight rating on Celanese Corporation (NYSE:CE) and increased his price target for the stock to $188 from $186. Meanwhile, Thomas E. Claugus of GMT Capital is one of the biggest stakeholders of Celanese Corporation (NYSE:CE) as of the end of the second quarter, according to the data tracked by Insider Monkey. Overall, 37 funds were bullish on Celanese Corporation (NYSE:CE) by the end of the June quarter, compared to 36 in the previous quarter.
5. Dow Inc. (NYSE:DOW)
Number of Hedge Fund Holders: 40
Dow Inc. (NYSE:DOW) ranks fifth on the list of 10 best material stocks to buy now. The Michigan-based company manufactures and sells chemicals, plastics, and agricultural products.
Investment manager Richard Pzena’s Pzena Investment Management is the biggest stakeholder of the Michigan-based chemical company as of the second quarter, with a $336 million stake. Overall, 40 funds of the 873 elite funds tracked by Insider Monkey reported owning stakes in Dow Inc. (NYSE:DOW) at the end of June 2021.
In the second quarter of 2021, Dow Inc. (NYSE:DOW) reported an EPS of $2.72, beating estimates by 0.28. The company’s revenue in the second quarter came in at $13.88 billion, beating revenue estimates by $1.09 billion. Dow Inc. (NYSE:DOW) currently pays its shareholders an annual dividend of $2.80 per share and offers a yield of 4.81%. The stock gained 19% in the past twelve months.
4. LyondellBasell Industries N.V. (NYSE:LYB)
Number of Hedge Fund Holders: 41
LyondellBasell Industries N.V. (NYSE:LYB) is a chemical manufacturer based in Texas that ranks fourth on the list of 10 best material stocks to buy now. LyondellBasell Industries N.V. (NYSE:LYB) is one of the leading chemical, plastic, and refining companies in the world.
On October 8, JPMorgan analyst Jeffrey Zekauskas kept an Overweight rating on LyondellBasell Industries N.V. (NYSE:LYB), with a price target of $135 per share. The stock gained 24% in the past twelve months.
In the second quarter of 2021, LyondellBasell Industries N.V. (NYSE:LYB) reported an EPS of $6.12, beating estimates by $0.50. The company’s second-quarter revenue was $11.56 billion, beating revenue estimates by $472.53 million.
LyondellBasell Industries N.V. (NYSE:LYB) currently offers a dividend yield of 4.61% and pays its shareholders an annual dividend of $4.52 per share.
Of the 873 elite funds tracked by Insider Monkey, 41 were long LyondellBasell Industries N.V. (NYSE:LYB) at the end of June. Entrepreneur and hedge fund manager Ken Griffin of Citadel Investment Group is one of the hedge funds with the largest stake in LyondellBasell Industries N.V. (NYSE:LYB), holding 1.44 million shares worth $149 million at the end of the second quarter.
3. Alcoa Corporation (NYSE:AA)
Number of Hedge Fund Holders: 44
Alcoa Corporation (NYSE:AA) is a Pittsburgh-based aluminum producer that ranks third on the list of 10 best material stocks to buy now. The company mines bauxite and iron ore, as well as smelts, processes, and fabricates aluminum.
On September 28, investment bank Morgan Stanley kept an Overweight rating on Alcoa Corporation (NYSE:AA) and raised its price target for the stock to $62 from $51.
Israel Englander’s Millennium Management recently upped their stake in Alcoa Corporation (NYSE:AA) by 1,095% at the end of the second quarter to 3.59 million shares worth $133 million. Overall, 44 funds were bullish on Alcoa Corporation (NYSE:AA) by the end of the June quarter, compared to 38 in the previous quarter.
In the second quarter of 2021, Alcoa Corporation (NYSE:AA) reported an EPS of $1.49, beating estimates by $0.18. The company’s revenue in the second quarter grew 32% year over year to $2.83 billion and beat revenue estimates by $196 million. Shares of Alcoa Corporation (NYSE:AA) increased 262% in the past twelve months.
2. DuPont de Nemours, Inc. (NYSE:DD)
Number of Hedge Fund Holders: 57
American chemical company DuPont de Nemours, Inc. (NYSE:DD) ranks second on the list of 10 best material stocks to buy now. The Delaware-based company is one of the world’s biggest producers of specialty chemicals producers. The company manufactures and sells adhesives, polymers, photovoltaics, resins, and lubricants used in a variety of applications such in the medical, industrial, telecom, and automotive industries.
On October 5, JPMorgan analysts upgraded DuPont de Nemours, Inc. (NYSE:DD) to Overweight from Neutral and increased its price target for the stock to $85 from $84.
In the second quarter of 2021, DuPont de Nemours, Inc. (NYSE:DD) reported an EPS of $1.06, beating estimates by $0.11. The company’s revenue in the second quarter was $4.13 billion. Shares of DuPont de Nemours, Inc. (NYSE:DD) increased 25% in the past twelve months.
At the end of the second quarter of 2021, 55 hedge funds in the database of Insider Monkey held stakes worth $1.65 billion in DuPont de Nemours, Inc. (NYSE:DD), up from 49 hedge funds in the previous quarter worth $1.72 billion.
Rhizome Partners mentioned DuPont de Nemours, Inc. (NYSE:DD) in its Q1 2021 investor letter:
“We have written extensively about the anticipated DuPont’s Reverse Morris Trust merger with International Flavors and Fragrances (IFF) in January of 2021. During the quarter, DuPont shares traded up significantly in anticipation of the deal. We tendered about 40% of our DuPont shares for IFF and received about half of the allocation due to pro-ration. Investors are finally starting to appreciate DuPont’s effort to cut costs, streamline operations, and spin off companies into pure-play companies that trade at higher multiples. We are still getting used to the higher multiples that investors will pay for larger market cap and pure play companies such as DuPont.”
1. Freeport-McMoRan Inc. (NYSE:FCX)
Number of Hedge Fund Holders: 76
Mining giant Freeport-McMoRan Inc. (NYSE:FCX) tops the list of the 10 best material stocks to buy now. The Arizona-based mining company engages in the exploration of minerals such as copper, molybdenum, and gold. The company runs several mining facilities in North and South America. Freeport-McMoRan Inc. (NYSE:FCX) also mines one of the biggest copper and gold deposits in the world located in Papua, Indonesia, in the Grasberg minerals district.
On October 6, Exane BNP Paribas analyst Jatinder Goel upgraded Freeport-McMoRan Inc. (NYSE:FCX) to Outperform from Neutral, with a price target of $39.50 per share. Meanwhile, BofA analyst Lawson Winder reiterated a Buy rating and a $30 price target for the mining stock.
On October 11, shares of Freeport-McMoRan Inc. (NYSE:FCX) climbed 8.4% as copper prices went up 2.6%to $9,280 a ton on the London Metal Exchange.
In the second quarter of 2021, Freeport-McMoRan Inc. (NYSE:FCX) reported an EPS of $0.77, beating estimates by $0.02. The company’s revenue in the second quarter grew 85% year over year to $5.75 billion. The stock gained 104% in the past twelve months.
As of the end of the second quarter, 76 hedge funds tracked by Insider Monkey reported owning stakes in Freeport-McMoRan Inc. (NYSE:FCX). The total worth of these stakes is $3.86 billion. This shows the hedge fund sentiment is positive for the mineral mining company as only 68 funds had stakes in the company in the previous quarter, having a total worth of $3.29 billion.
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Disclosure: None. 10 Best Material Stocks to Buy Now is originally published on Insider Monkey.
