11 Best Materials Stocks for 2021

Published on July 5, 2021 at 4:41 pm by Fatima Farooq in Hedge Funds, News

In this article, we will be looking at the 11 best materials stocks for 2021.

In a time of financial volatility induced by a global pandemic and inflation all but knocking on our doors, as per comments made by the Federal Reserve, one industry has managed to weather the storm and retain its relevance within investor circles: basic materials. According to the Wall Street Journal, in light of inflation concerns, investors have begun racking up their shares in energy and materials stocks as of May 2021, on the expectation that the incoming inflation would accompany financial growth for these stocks. These two groups of stocks were leading the S&P 500’s sectors in May, with a 6.9% gain for the materials sector, performing much better than other sectors like technology and other growth stocks which contributed to the 0.4% fall in the US stock index.

The materials sector has been on a steady rise since the end of 2020, with the sector having gained 16% near the end of last year, performing better than all the other sectors in the S&P 500 index. This trend has continued, as mentioned above, well into 2021, with analysts and investors anticipating that it will continue on this path as the economy gets more revved up. Bloomberg has reported that raw materials account for over half of the 20 best performing exchange-traded products in 2021, while investors allocated about $2.6 billion in May to tracking materials stocks in light of consumer activity and construction surges. Moves by major firms like Aberdeen Standard Investments and Tidal ETF Trust indicating interest in the materials sector is proof that investor circles are fixating on the sector. Aberdeen Standard Investments has filed for two broad commodities ETFs and an industrial metals fund, for instance, while Tidal ETF Trust filed for the SonicShares Global Shipping ETF, as per Bloomberg reports.

Jason Bloom, the head of fixed income and alternatives ETF strategy at Invesco, has commented that higher inflation can be expected in the next 5-10 years, and hence, investors making moves into the materials sector to model their portfolio along safer lines is reasonable. For Bloom, the materials sector serves as a “potent” hedge against inflation. As such, materials sector companies like LyondellBasell Industries N.V. (NYSE: LYB), Freeport-McMoRan Inc. (NYSE: FCX), and Rio Tinto Group (NYSE: RIO) are gaining an edge in the stock market. Hence, we have compiled a list of the best materials stocks for 2021.

Because of the pandemic, the entire hedge fund industry is feeling the reverberations of the changing financial landscape. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, 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 124 percentage points since March 2017. Between March 2017 and May 28th, 2021, our monthly newsletter’s stock picks returned 206.8%, vs. 91.0% for the SPY. Our stock picks outperformed the market by more than 115 percentage points (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017, and they lost 13% through November 16th. 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.

Without further ado, let’s look at the 11 best materials stocks for 2021. We chose these stocks based on hedge fund sentiment, fundamentals, future growth catalysts and analysts’ ratings.

Best Materials Stocks for 2021

11. Ternium S.A. (NYSE: TX)

Number of Hedge Fund Holders: 14

Ternium S.A. (NYSE: TX) is a manufacturer and processor of steel products in Mexico, Argentina, Paraguay, Chile, Bolivia, Uruguay, Brazil, the US, Colombia, Guatemala, Costa Rica, Honduras, El Salvador, and Nicaragua. The company has two segments: Steel and Mining. It ranks 11th on our list of the best materials stocks for 2021.

This April, Ternium S.A. (NYSE: TX) announced its dividend of $2.1, with a forward yield of 5.17%. In the first quarter of 2021, Ternium S.A. (NYSE: TX) had an EPS of $3.07, beating estimates by $0.4. The company’s revenue was $3.25 billion, up 43.05% year over year and beating estimates by $54 million, and its gross profit margin is 24.62%. The stock has a forward PE ratio of 4.01 and has gained 32.09% in the past 6 months and year to date.

By the end of the first quarter of 2021, 14 hedge funds held stakes in Ternium S.A. (NYSE: TX) worth roughly $203 million. This is compared to 13 hedge funds in the previous quarter with a total stake value of roughly $104 million. Like LyondellBasell Industries N.V. (NYSE: LYB), Freeport-McMoRan Inc. (NYSE: FCX), and Rio Tinto Group (NYSE: RIO), Ternium S.A. (NYSE: TX) is a good materials stocks to invest in.

10. BHP Group (NYSE: BHP)

Number of Hedge Fund Holders: 23

BHP Group (NYSE: BHP) is a natural resources business operating in Australia, Europe, China, Japan, India, South Korea, North America, South America, and internationally. The company has four segments: petroleum, copper, iron ore, and coal. It ranks 10th on our list of the best materials stocks for 2021.

This June, BHP Group (NYSE: BHP) announced plans to double its spending on exploration for base metals in the next 5 years, as per Laura Tyler, the Chief Technical Officer for the company in a report by Reuters. Continuing the report, BHP Group (NYSE: BHP) was said to be expected to bring in stronger profits this quarter because of the rise in iron ore prices. Reuters has also reported that BHP Group (NYSE: BHP) is one of two companies offering Samarco a $238 million debtor-in-possession loan to bail the miner out of bankruptcy. In the fiscal second quarter of 2021, BHP Group (NYSE: BHP) had an EPS of $0.38, and its revenue was $7.25 billion, up 7.56% year over year. The company has a gross profit margin of 78.75% and the stock has gained 7.51% in the past 6 months and year to date.

By the end of the first quarter of 2021, 23 hedge funds held stakes in BHP Group (NYSE: BHP) worth roughly $1.35 billion. This is compared to 18 hedge funds in the previous quarter with a total stake value of roughly $1.21 billion. Like LyondellBasell Industries N.V. (NYSE: LYB), Freeport-McMoRan Inc. (NYSE: FCX), and Rio Tinto Group (NYSE: RIO), BHP Group (NYSE: BHP) is a good materials stocks to invest in.

Harding Loevner, an investment management firm, mentioned BHP Group (NYSE: BHP) in its first-quarter 2021 investor letter. Here’s what they said:

“Our purchase of Australian mining company BHP is an example of a quality company at a moderate valuation that should deliver attractive long-term returns. We believe the market has undervalued its enduring competitive advantage due to its low cost iron and copper mining operations which has allowed the company to deliver consistent profits and cash flows across the inevitable ups and downs of the global metals cycle. While the variability of commodity prices prevents BHP from scoring in the top ranks of measured quality, we are willing to bear some of that uncertainty in return for a more attractive valuation given the company’s strong business fundamentals.”

9. CEMEX, S.A.B. de C.V. (NYSE: CX)

Number of Hedge Fund Holders: 24

CEMEX, S.A.B. de C.V. (NYSE: CX) is a producer and distributor of cement, ready-mix concrete, aggregates, clinker, and other construction materials across the globe. The company ranks 9th on our list of the best materials stocks for 2021.

This June, CEMEX, S.A.B. de C.V. (NYSE: CX) raised its FY 2021 EBITDA guidance to $3.1 billion, crossing expectations and in light of rising demand for its products. The company also mentioned that it would be reducing net debt by $2 billion in 2021, through free cash flow generation and other means. It also expects growth investments to add approximately $400 million to its EBITDA by 2023. This May, CEMEX, S.A.B. de C.V. (NYSE: CX) also announced its partnership with BP to work on net-zero emissions in their production processes and transportation. In the first quarter of 2021, CEMEX, S.A.B. de C.V. (NYSE: CX) had an EPS of $0.38, beating estimates by $0.34. The company’s revenue was $3.41 billion, up 10.56% year over year and beating estimates by $159 million. The company’s gross profit margin is 32.5% and its stock has gained 61.82% in the past 6 months and year to date.

By the end of the first quarter of 2021, 24 hedge funds held stakes in CEMEX, S.A.B. de C.V. (NYSE: CX) worth roughly $471 million. This is compared to 22 hedge funds in the previous quarter with a total stake value of roughly $455 million. Like LyondellBasell Industries N.V. (NYSE: LYB), Freeport-McMoRan Inc. (NYSE: FCX), and Rio Tinto Group (NYSE: RIO), CEMEX, S.A.B. de C.V. (NYSE: CX) is a good materials stocks to invest in.

8. Rio Tinto Group (NYSE: RIO)

Number of Hedge Fund Holders: 25

Rio Tinto Group (NYSE: RIO) is a company operating in the mining, exploration, and processing of mineral resources worldwide. It offers aluminum, copper, diamonds, gold, borates, and other minerals, and ranks 8th on our list of the best materials stocks for 2021.

Rio Tinto Group (NYSE: RIO) has announced its partnership with Schneider Electric (OTC: SBGSY) to work on a sustainable market ecosystem for both companies. The two are working on reducing their carbon footprint through the deal, and will also be evaluating new opportunities like the efficient production of other materials for renewable technologies. The company has a gross profit margin of 41.92%. The stock has a trailing PE ratio of 13.61 and has gained 6.89% in the past 6 months and year to date.

By the end of the first quarter of 2021, 25 hedge funds held stakes in Rio Tinto Group (NYSE: RIO) worth roughly $1.59 billion. This is compared to 26 hedge funds in the previous quarter with a total stake value of roughly $1.71 billion.

7. MP Materials Corp. (NYSE: MP)

Number of Hedge Fund Holders: 29

MP Materials Corp. (NYSE: MP) is a company operating in the integrated rare earth mining and processing business. The company owns the Mountain Pass facility in the Western Hemisphere, and it ranks 7th on our list of the best materials stocks for 2021.

On June 30th, Baird initiated its coverage of MP Materials Corp. (NYSE: MP) with an Outperform rating and a $45 price target. The firm referred to the company as a “rare magnetic opportunity,” with analyst Ben Kallo commenting that the company’s Mountain Pass is a unique asset and MP Materials Corp. (NYSE: MP) deserves a premium valuation. Earlier this June, the Russell 3000 index added MP Materials Corp. (NYSE: MP) while deleting some other basic materials companies. In the first quarter of 2021, MP Materials Corp. (NYSE: MP) had an EPS of $0.13, beating estimates by $0.05. Its revenue was $59.97 million, beating estimates by $15.57 million, and it has a gross profit margin of 59.1%. MP Materials Corp. (NYSE: MP) has gained 29.38% in the past 6 months and year to date.

By the end of the first quarter of 2021, 29 hedge funds held stakes in MP Materials Corp. (NYSE: MP) worth roughly $2.62 billion. This is compared to 32 hedge funds in the previous quarter with a total stake value of roughly $2.74 billion. Like LyondellBasell Industries N.V. (NYSE: LYB), Freeport-McMoRan Inc. (NYSE: FCX), and Rio Tinto Group (NYSE: RIO), MP Materials Corp. (NYSE: MP) is a good materials stocks to invest in.

6. Teck Resources Limited (NYSE: TECK)

Number of Hedge Fund Holders: 30

Teck Resources Limited (NYSE: TECK) explores, acquires, develops, and produces natural resources in Asia, Europe, and North America. The company’s segments include Steelmaking Coal, Copper, Zinc, and Energy. It ranks 6th on our list of the best materials stocks for 2021.

This May, Deutsche Bank upgraded Teck Resources Limited (NYSE: TECK) shares to Buy with a $30 price target. Analyst Abhinandan Agarwal commented that the stock’s delivery of the QB2 copper project will transform the portfolio and open the path for free cash flow, returns, and lower emissions in production. The analyst has estimated a 45% increase in Teck Resources Limited’s (NYSE: TECK) copper equivalent volumes, a development that would make the company’s balance sheet more robust. In the first quarter of 2021, Teck Resources Limited (NYSE: TECK) had an EPS of $0.5, missing estimates by -$0.02. The company’s revenue was $2.07 billion, up 23.43% year over year but missing estimates by $56.46 million, and its gross profit margin is 17.43%. Teck Resources Limited (NYSE: TECK) has gained 20.14% in the past 6 months and year to date.

By the end of the first quarter of 2021, 30 hedge funds held stakes in Teck Resources Limited (NYSE: TECK) worth roughly $1.07 billion. This is compared to 31 hedge funds in the previous quarter with a total stake value of roughly $798 million. Like LyondellBasell Industries N.V. (NYSE: LYB), Freeport-McMoRan Inc. (NYSE: FCX), and Rio Tinto Group (NYSE: RIO), Teck Resources Limited (NYSE: TECK) is a good materials stocks to invest in.

5. Air Products and Chemicals, Inc. (NYSE: APD)

Number of Hedge Fund Holders: 32

Air Products and Chemicals, Inc. (NYSE: APD) is a company providing atmospheric gases, process and speciality gases, equipment, and services worldwide. The company ranks 5th on our list of the best materials stocks for 2021.

On June 11th, Susquehanna upgraded Air Products and Chemicals, Inc. (NYSE: APD) to Positive with a $350 price target. The company also revealed plans to build a net-zero hydrogen energy complex in Alberta this year. In the fiscal second quarter of 2021, Air Products and Chemicals, Inc. (NYSE: APD) had an EPS of $2.08, missing estimates by -$0.03. The company’s revenue was $2.5 billion, up 12.89% year over year, beating estimates by $149.99 million and it has a gross profit margin of 32.1%. The stock has gained 7.68% in the past 6 months and year to date.

By the end of the first quarter of 2021, 32 hedge funds held stakes in Air Products and Chemicals, Inc. (NYSE: APD) worth roughly $586 million. This is compared to 50 hedge funds in the previous quarter with a total stake value of roughly $1.28 billion.

4. International Paper Company (NYSE: IP)

Number of Hedge Fund Holders: 36

International Paper Company (NYSE: IP) is a paper and packaging company operating n the US and internationally. It has three segments: Industrial Packaging, Global Cellulose Fibers, and Printing Papers. The company ranks 4th on our list of the best materials stocks for 2021.

On June 28th, Stephens upgraded International Paper Company (NYSE: IP) to Overweight, while earlier that month, Argus also upgraded the company to Buy with a $75 price target. In the first quarter of 2021, International Paper Company (NYSE: IP) had an EPS of $0.76, beating estimates by $0.15. The company’s revenue was $5.36 billion, up 0.21% year over year and beating estimates by $52.44 million, and it has a gross profit margin of 29.71%. The stock has gained 26.79% in the past 6 months and year to date.

By the end of the first quarter of 2021, 36 hedge funds held stakes in International Paper Company (NYSE: IP) worth roughly $259 million. This is compared to 31 hedge funds in the previous quarter with a total stake value of roughly $167 million.

3. Celanese Corporation (NYSE: CE)

Number of Hedge Fund Holders: 36

Celanese Corporation (NYSE: CE) is a technology and specialty materials company, manufacturing high-performance engineered polymers in the US and internationally. The company ranks 3rd on our list of the best materials stocks for 2021.

On June 30th, Celanese Corporation (NYSE: CE) acquired Exxon Mobil’s Santoprene business for $1.15 billion, and earlier that month, the company also acquired POM Technology and sales agreements from Grupa Azoty. In the first quarter of 2021, Celanese Corporation (NYSE: CE) had an EPS of $3.46, beating estimates by $0.45. The company’s revenue was $1.8 billion, up 23.15% year over year and beating estimates by $60.7 million, and it has a gross profit margin of 23.86%. The stock has gained 21.61% in the past 6 months and year to date.

By the end of the first quarter of 2021, 36 hedge funds held stakes in Celanese Corporation (NYSE: CE) worth roughly $759 million. This is compared to 33 hedge funds in the previous quarter with a total stake value of roughly $997 million.

2. The Mosaic Company (NYSE: MOS)

Number of Hedge Fund Holders: 38

The Mosaic Company (NYSE: MOS) is a producer and marketer of concentrated phosphate and potash crop nutrients in the US and internationally. The company ranks 2nd on our list of the best materials stocks for 2021.

In a report after the latest consumer inflation data, UBS named The Mosaic Company (NYSE: MOS) among the stocks it recommends to investors on the back of pricing power, margin momentum and input cost exposure.

In the first quarter of 2021, The Mosaic Company (NYSE: MOS) had an EPS of $0.57, beating estimates by $0.04. The company’s revenue was $2.30 billion, up 27.75% year over year and beating estimates by $50.62 million. It has a gross profit margin of 15.42% and the stock has gained 34.31% in the past 6 months and year to date.

By the end of the first quarter of 2021, 38 hedge funds held stakes in The Mosaic Company (NYSE: MOS) worth roughly $944 million. This is compared to 39 hedge funds in the previous quarter with a total stake value of roughly $841 million.

Appleseed Fund, an investment management firm, mentioned The Mosaic Company (NYSE: MOS) in its first-quarter 2021 investor letter. Here’s what they said:

“Our most significant contributors to the Fund’s equity performance during the quarter (includes) Mosaic Company (MOS). As for Mosaic, its share price has risen in sympathy with increasing grain prices, which should stimulate additional farmer investment into improving crop yields.”

1. LyondellBasell Industries N.V. (NYSE: LYB)

Number of Hedge Fund Holders: 47

LyondellBasell Industries N.V. (NYSE: LYB) is a chemical company operating in the US, Germany, Mexico, Italy, Poland, France, Japan, China, the Netherlands, and internationally. The company ranks 1st on our list of the best materials stocks for 2021.

This May, LyondellBasell Industries N.V. (NYSE: LYB) declared a 7.6% increase in its dividend, making it $1.13 per share, with a forward yield of 3.98%. In the first quarter of 2021, LyondellBasell Industries N.V. (NYSE: LYB) had an EPS of $3.20, beating estimates by $0.55. The company’s revenue was $9.08 billion, up 21.19% year over year but missing estimates by $37.2 million. The stock has gained 15.86% in the past 6 months and year to date and LyondellBasell Industries N.V. (NYSE: LYB) has a gross profit margin of 14.22% as well.

By the end of the first quarter of 2021, 47 hedge funds held stakes in LyondellBasell Industries N.V. (NYSE: LYB) worth roughly $891 million. This is compared to 27 hedge funds in the previous quarter with a total stake value of roughly $682 million.

You can also take a peek at the Top Construction Companies in the US in 2021 and 10 Best Steels Stocks to Buy Amid Upcoming Infrastructure, Construction Boom.

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11 Best Materials Stocks for 2021

Published on July 5, 2021 at 4:41 pm by Fatima Farooq in Hedge Funds, News