In this article, we will discuss 11 Best Materials Stocks to Buy According to Hedge Funds.

Materials stocks are those companies that produce chemicals, construction materials, and paper products. Businesses involved in the exploration and processing of commodities are also included in this sector.

Materials demand is cyclical, rendering sector players extremely vulnerable to economic fluctuations. The demand for basic materials tends to drop when economic conditions deteriorate, which lowers prices and impacts the profitability of material producers. However, the materials sector can be impacted by a variety of factors, including the economic cycle. Supply chain challenges, legislation, and inflation are just a few of the many factors that could impact demand, prices, and industry profitability in the materials industry.

After Russia invaded Ukraine in 2022, a new challenge arose in the industry. The region provides essential metals for steel production and exports minerals for fertilizer, such as potash; therefore, the war caused disruptions in the worldwide supply chain for resources. Most basic materials’ costs increased due to supply constraints, which had a significant impact on both the industry and the overall economy.

Looking forward, a cautiously positive view for the materials sector in 2025 has been strengthened by long-term structural demand and improved macroeconomic conditions. Persistent economic concerns in the United States and a noticeable slowdown in China, two important markets for industrial materials, burdened the sector in 2024. However, according to Fidelity, the situation seems more favorable for growth in 2025 as China implements economic stimulus measures and central banks in major economies currently lean toward monetary easing. Some subsectors stand to benefit from both a short-term cyclical recovery and advantageous long-term supply-demand imbalances, especially those related to copper and other crucial inputs for infrastructure and electrification. Furthermore, the sector’s rate-sensitive industries, such as chemicals, may gain from lower interest rates, while more robust, high-quality firms may provide defensive strength. The sector is positioned for a potentially better performance in 2025 due to a combination of financial assistance, a possible recovery in Chinese demand, and strategic exposure to growth-linked materials.

Currently, according to a strategist for equity derivatives at Barclays, Stefano Pascale, options traders are undervaluing the risks associated with materials stocks because the sector’s predicted volatility is close to historic lows, making downside protection cheap. Steel and paper companies are among the materials stocks that are susceptible to tariffs because of their dependence on international supply chains, and additional tariffs are anticipated to be announced soon by President Trump.

Despite this, Pascale commented:

“The volatility market is giving you an exceptionally good opportunity here of cheap materials puts. Even if you didn’t have a trade war, this would be, historically speaking, a very attractive trade.”

Materials underperformed in 2018 due to Trump’s tariffs, and similar drops may be seen this year, with the Dow down 7%. According to statistics provided by Bloomberg Intelligence, sell-side analysts have lowered their expectations for the material sector, anticipating earnings to climb 5.9% this year, down from an estimate of 16% in January. However, traders must consider liquidity risks, as the bid-ask spread for materials options is $0.20, as opposed to $0.04 for broader market options.

With that said, here are the 11 Best Materials Stocks to Buy According to Hedge Funds.

Methodology

We sifted through the Materials ETFs and online rankings to form an initial list of the 25 materials stocks. From the resultant dataset, we chose 11 stocks with the highest number of hedge fund investors, using Insider Monkey’s database of 1009 hedge funds in Q4 2024 to gauge hedge fund sentiment for stocks.

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).

11. Agnico Eagle Mines Limited (NYSE:AEM)

Number of Hedge Fund Holders: 53   

Agnico Eagle Mines Limited (NYSE:AEM) is the world’s third-largest gold miner in terms of production, with operations in Canada, Mexico, Finland, and Australia, indicating a preference for lower-risk nations. Its four cornerstone assets, Detour Lake, Canadian Malartic, Meadowbank, and Meliadine, generate between 350,000 and 700,000 ounces of gold per year. All four are in Canada. AEM is one of the best materials stocks to consider.

About 60% of the 3.4 million ounces of gold sold by the firm in 2024 came from these mines; the business also produced trace amounts of copper, zinc, and silver. At the end of 2024, Agnico Eagle Mines Limited (NYSE:AEM) had around 15 years of gold reserves.

Tanya Jakusconek, a Scotiabank analyst, maintained an Outperform rating on Agnico Eagle Mines Limited (NYSE:AEM) shares and increased her price objective from $105 to $126. The analyst informs investors that the company is revising its price estimates for stocks in the Gold & Precious Minerals sector. Given that most companies have a weaker operating quarter in Q1 and a greater operating performance in the second half of the year, the company anticipates flat margins from quarter to quarter. According to the firm, most businesses would be focusing on comments regarding the possible impact of tariffs as they examine their supply chain, purchasing, and total cost impact.

10. Martin Marietta Materials, Inc. (NYSE:MLM)

Number of Hedge Fund Holders: 54   

Martin Marietta Materials, Inc. (NYSE:MLM) is among the best materials stocks since it is a major manufacturer of construction materials, which include crushed stone, sand, and gravel, in the United States. The company sold 191 million tons of aggregates in 2024. The majority of the firm’s sales come from its most significant markets, which are Texas, Colorado, North Carolina, Georgia, and Florida. Additionally, the company uses its aggregates in its ready-mixed concrete and asphalt businesses and makes cement in Texas. Its magnesia specialties business manufactures magnesium-based chemical products and dolomitic lime. The firm is poised to gain from higher infrastructure spending in the United States. Although the company mostly produces aggregates, it also produces cement in Texas.

Despite the difficult market conditions, Martin Marietta Materials, Inc. (NYSE:MLM) produced exceptional overall performance in 2024. In Q4 of 2024, the business reported consolidated adjusted EBITDA of $545 million, an 8% growth, while margins jumped by 210 basis points to 33%. Its Magnesia Specialties division generated record-breaking revenues of $320 million and gross profit of $107 million, showing gains of 2% and 10%, respectively. Over $2 billion in non-core asset divestitures and $4 billion in total purchases were among the approximately $6 billion in portfolio-enhancing deals the company conducted.

The business earned the highest full-year safety event rates in Martin Marietta Materials, Inc. (NYSE:MLM)’s history, and it obtained a world-class lost time incident rate for the eighth consecutive year.

9. Vulcan Materials Company (NYSE:VMC)

Number of Hedge Fund Holders: 57

A major force in the construction materials sector, Vulcan Materials Company (NYSE:VMC) specializes in aggregates for vital infrastructure projects like roads, bridges, tunnels, and airports, including asphalt, ready-mix concrete, and crushed stone. Texas, California, Virginia, Tennessee, Georgia, Florida, North Carolina, and Alabama are among its biggest markets. The firm sold 3.6 million cubic yards of ready-mix, 13.6 million tons of asphalt mix, and 219.9 million tons of aggregates in 2024. The company’s aggregate reserves were close to 16 billion tons as of December 31, 2023. VMC is ranked ninth on our list of the best materials stocks.

Vulcan Materials Company (NYSE:VMC), which has a market capitalization of $30 billion and an enterprise value of $34.8 billion, runs local monopolies in 23 states. The Gulf Coast market accounts for almost half of its revenue. Through programs like “Build America,” which sustain demand for building materials, the business is positioned as a major beneficiary of federal infrastructure expenditure. The firm’s anticipated 17% EPS growth for 2026 shows that, despite recent market volatility and a 19% drop from its 30-day high, it is still an earnings compounder with strong pricing power.

Following a beat in Q4 earnings, RBC Capital increased its price objective for Vulcan Materials Company (NYSE:VMC) from $269 to $286 and maintained a Sector Perform rating on the shares. According to the analyst’s research note, the business continues to benefit from a favorable price/cost setup and internal cost control in FY25, even though the organic volume prediction was weaker and pricing was somewhat restrained. The company announced a positive Q4 result and FY25 guide.