In this article, we will take a detailed look at the 16 Best Materials Stocks To Buy in 2024. For a quick overview of such stocks, read our article 5 Best Materials Stocks To Buy in 2024.
The basic materials industry is almost always on investors’ radar since it acts as a pulse of the broader economic activity in the US and aboard. Geopolitical risks, a slump in China and recession risks have been weighing down the sector for quite some time now. Precious Metals and Mining, an important industry in the Basic Materials sector, is down about 20% over the past one year. A huge decline in lithium, iron ore and nickel prices driven by a slowing demand from China and a dampening activity in the EV industry has been crushing materials stocks. Several companies in the sector shut down plants and postponed planned projects this year due the slowdown. For example, Albemarle, whose shares are down about 15% so far this year, announced a $1.3 billion plant in South Carolina for lithium processing. However, the company this year reported to have cut spending on the plant following a decline in lithium prices.
Albemarle isn’t alone. Glencore also suspended production at one of its plants in New Caledonia, a French territory consisting of several islands.
Uranium: A Silver Lining for Materials Stocks?
But there have been several bright spots in the basic materials sector. Basic materials investors are now focusing on uranium miners who are flying high amid a huge demand of uranium driven by a global push towards clean energy and production declines. While uranium prices pulled back recently, they surged over the past few months and have a bright outlook since Kazakhstan’s Kazatomprom struggled to increase production. The company last month posted record profits because of high uranium prices but said that it won’t be able to cover the rising demand amid geopolitical uncertainties and supply chain issues.
Iron Ore Price and Outlook in 2024: A “Structural Shift”
Iron ore prices continue to remain in the headlines amid volatility in China. There seems to be no end in sight to the property crisis in China. The government is cracking down against the property sector and trying to find new, better ways for economic expansion. Analysts say China’s property sector has been the biggest customer of steel, and since the sector is lacking any growth catalysts, the outlook for the metal does not look good. Bloomberg in a report quoted Cao Ying, chief ferrous metals analyst at SDIC Essence Futures Co., who said that weakness in iron ore prices for more than a couple of weeks would mean companies in the sector would have to think about “a structural shift” in the industry. The report said iron ore prices staying under $100 for too long would force many companies to shutter business.
The China Factor
However, there are some indicators that manufacturing activity in China is rebounding which could bring relief for the materials sector in 2024. Bloomberg recently reported that the Caixin manufacturing purchasing managers’ index rose to 51.1 on April 1, recording growth for the fifth straight month. Manufacturing PMI in March jumped and surpassed expectations.
The ING Group in its 2024 outlook report for the materials sector had pointed out the possible risks for iron ore:
“Looking further ahead, downside risks include China looking to replace older steel capacity with electric arc furnace capacity in order to help the country meet its decarbonisation goals. Growth in electric arc furnace (EAF) capacity at the expense of basic oxygen furnace (BOF) capacity will be a concern for the medium to long-term outlook for Chinese iron ore demand, reflecting increasing secondary production. Currently, 9.5% of China’s steel capacities are electric steel mills. The country plans to increase the share of steel from EAFs to 15% by 2025 amid a drive to reduce carbon emissions, increasing its appetite for ferrous scrap. China aims to achieve carbon neutrality by 2060.”
Investing in Materials Stocks in 2024: Performance and Outlook
But analysts are hopeful of a broader rebound in the materials sector in 2024 amid rate cut expectations and a possible return of economic expansion. Global X Uranium ETF (NYSEARCA:URA) is up 12% year to date, while the ETF returned 60% over the past one year. S&P Materials Select Sector Index is up 8.65% year to date. Fidelity in its 2024 report on the sector said that investors have to move with caution and pile into areas that have chances of growth in 2024. For example, lithium prices are declining amid oversupply and an overall slowdown in the EV industry. On the other hand, copper investors are rejoicing due to a rise in copper prices. Fidelity talked about the reasons behind this trend:
“Copper supply has been challenged for some time now, and could become increasingly tight in the years ahead. Copper mines are aging, and the quality of the ore produced has been decreasing in key producing countries like Chile and Peru. Although demand for copper dipped a bit this past year due to China’s economic headwinds, I believe that an eventual pickup in demand could trigger a rally in copper prices, because supply will be tight.”
Photo by Shane Cottle on Unsplash
Methodology
For this article we first listed down all holdings of Vanguard Materials ETF (VAW) and gauged hedge fund sentiment of all these stocks using Insider Monkey’s database of 933 hedge funds. From these stocks we picked 16 companies with the highest number of hedge fund investors. Why pay attention to what hedge funds are up to? Hedge funds’ top 10 consensus stock picks outperformed the S&P 500 Index by more than 140 percentage points over the last 10 years (see the details here).
16. Dow Inc (NYSE:DOW)
Number of Hedge Fund Investors: 39
Dow Inc (NYSE:DOW) is one of the biggest materials companies in the US and an important constituent of the Vanguard Materials ETF. It is also a popular stock among hedge funds since Insider Monkey’s database shows that 39 hedge funds had stakes in Dow Inc (NYSE:DOW). The stock has gained about 10% over the past one year. In January Dow Inc (NYSE:DOW) posted Q4 results. Adjusted EPS in the period came in at $0.43, beating estimates by $0.03. Revenue fell 10.5% year over year to $10.62 billion, beating estimates by $220 million.
15. Air Products & Chemicals Inc. (NYSE:APD)
Number of Hedge Fund Investors: 42
Air Products & Chemicals Inc. (NYSE:APD) is one of the biggest suppliers of industrial gases and chemicals in the US. As of the end of the last quarter of 2023, 42 hedge funds out of the 933 funds tracked by Insider Monkey had stakes in Air Products & Chemicals Inc. (NYSE:APD). The most notable stakeholder of Air Products & Chemicals Inc. (NYSE:APD) during this period was Ken Griffin’s Citadel Investment Group which owns a $134 million stake in Air Products & Chemicals Inc. (NYSE:APD).
Bank of America in February upgraded the stock to Buy from Neutral, citing attractive valuation and clean energy projects of Air Products & Chemicals Inc. (NYSE:APD),
14. Mosaic Co. (NYSE:MOS)
Number of Hedge Fund Investors: 43
Mosaic Co. (NYSE:MOS) is one of the top materials stocks in the Vanguard Materials ETF. Mosaic Co. (NYSE:MOS) mines phosphate, potash, and collects urea for fertilizers.
A total of 43 hedge funds in Insider Monkey had stakes in Mosaic Co. (NYSE:MOS) as of the end of the fourth quarter of 2023. The biggest stake in Mosaic Co. (NYSE:MOS) is owned by Cliff Asness’s AQR Capital Management which owns an $116 million stake in Mosaic Co. (NYSE:MOS).
13. Berry Global Group Inc. (NYSE:BERY)
Number of Hedge Fund Investors: 43
Packaging solutions company Berry Global Group Inc. (NYSE:BERY) is one of the best materials stocks to buy in 2024 according to hedge funds. In February, Berry Global Group Inc. (NYSE:BERY) posted Q1 results. Adjusted EPS in the period came in at $1.22, missing estimates by $0.09. Revenue in the quarter fell 6.9% year over year to $2.9 billion, missing estimates by $90 million.
A total of 43 hedge funds in Insider Monkey’s database had stakes in Berry Global Group Inc. (NYSE:BERY) as of the end of 2023.
12. Arch Resources Inc. (NYSE:ARCH)
Number of Hedge Fund Investors: 44
Missouri-based coal mining company Arch Resources Inc. (NYSE:ARCH) shares have gained about 16% over the past one year. Insider Monkey’s database of 933 hedge funds shows that 44 hedge funds had Arch Resources Inc. (NYSE:ARCH) in their portfolios heading into 2024. The most notable stake in Arch Resources Inc. (NYSE:ARCH) is owned by Len Kipp and Xavier Majic’s Maple Rock Capital which owns an $84 million stake in Arch Resources Inc. (NYSE:ARCH).
11. LyondellBasell Industries NV Class A (NYSE:LYB)
Number of Hedge Fund Investors: 46
Netherlands-based chemicals company LyondellBasell Industries NV Class A (NYSE:LYB) is one of the most popular materials stocks among the 933 hedge funds tracked by Insider Monkey and an important part of the Vanguard Materials ETF. In February, JPMorgan upgraded the stock to Overweight from Neutral, citing dividend. JPMorgan likes LyondellBasell Industries NV Class A’s (NYSE:LYB) 5% dividend hike announced in May.
10. Ecolab Inc. (NYSE:ECL)
Number of Hedge Fund Investors: 47
Water hygiene solutions company Ecolab Inc. (NYSE:ECL) is the third biggest holding of the Vanguard Materials ETF. The stock is also highly popular among the smart money investors, with 47 hedge funds in Insider Monkey database having stakes in Ecolab Inc. (NYSE:ECL). Bill & Melinda Gates Foundation Trust owns a stake worth over $1 billion in Ecolab Inc. (NYSE:ECL).
Earlier this month, Piper Sandler started covering the stock with an Overweight rating and a $260 price target.
Piper Sandler expects Ecolab Inc.’s (NYSE:ECL) EBITDA to reach $3.88 billion by 2025.
Mairs & Power Growth Fund stated the following regarding Ecolab Inc. (NYSE:ECL) in its fourth quarter 2023 investor letter:
“All of our Materials holdings—Ecolab Inc. (NYSE:ECL), HB Fuller (FUL), and Sherwin Williams (SHW)—also posted strong results in 2023, a stark reversal from the prior year. After oil prices spiked above $100 in 2022 due to the Ukraine-Russia Conflict, oil has since pulled back to the low $70s. Oil and its by-products are major inputs for all of our Materials holdings; as such, lower oil prices have led to a rebound in profits. For example, our largest Materials holding—Ecolab—is expected to increase earnings more than 15% this year after declining 5% last year.”
9. WestRock Co. (NYSE:WRK)
Number of Hedge Fund Investors: 47
Corrugated packaging company WestRock Co. (NYSE:WRK) ranks ninth in our list of the best materials stocks to invest in 2024 according to hedge funds.
Insider Monkey’s proprietary database of 933 hedge funds shows that 47 funds reported owning stakes in WestRock Co. (NYSE:WRK) as of the end of last year. Some notable stakeholders of WestRock Co. (NYSE:WRK) included Edgar Wachenheim’s Greenhaven Associates ($557 million stake), Simon Sadler’s Segantii Capital ($121 million stake) and Israel Englander’s Millennium Management ($103 million stake).
8. Axalta Coating Systems Ltd. (NYSE:AXTA)
Number of Hedge Fund Investors: 47
Pennsylvania-based paint and manufacturing company Axalta Coating Systems Ltd. (NYSE:AXTA) is one of the best materials stocks to buy in 2024. Earlier this year Axalta Coating Systems Ltd. (NYSE:AXTA) posted Q4 results. Adjusted EPS in the period totaled $0.43, missing estimates by $0.01. Revenue in the quarter jumped 4.8% year over year to $1.3 billion, beating estimates by $10 million.
Of the 47 hedge funds that reported owning stakes in Axalta Coating Systems Ltd. (NYSE:AXTA) as of the end of the last quarter of 2023, John W. Rogers’ Ariel Investments had a $162 million stake in Axalta Coating Systems Ltd. (NYSE:AXTA).
Artisan Select Equity Fund stated the following regarding Axalta Coating Systems Ltd. (NYSE:AXTA) in its fourth quarter 2023 investor letter:
“Our top performers this quarter were American Express, Expedia and Axalta Coating Systems Ltd. (NYSE:AXTA). Axalta reported strong Q3 results, and the shares reacted very positively, gaining 26% for the quarter. Axalta—a leading coatings manufacturer—has been pushing through price increases in the wake of significant raw material cost inflation. Investors have questioned its ability to push through the necessary price increases in order to restore operating margins to a healthy level. Recent results confirm that Axalta is on track to do so. Revenue was up 6%, and EBIT increased 27%. Management confirmed that they are on track to restore operating margins to pre-COVID levels.”
7. Corteva Inc. (NYSE:CTVA)
Number of Hedge Fund Investors: 51
Ranking seventh in our list of the best materials stocks to invest in according to hedge funds is Indiana-based agricultural chemical and seed company Corteva Inc. (NYSE:CTVA), whose shares are up 18% so far this year.
Last month, Jefferies increased its price target on Corteva Inc. (NYSE:CTVA) to $67.00 from $64, reitaetaing its Buy rating on the stock.
Aristotle Value Equity Strategy stated the following regarding Corteva, Inc. (NYSE:CTVA) in its fourth quarter 2023 investor letter:
“Corteva, Inc. (NYSE:CTVA), the seed and crop protection company, was the largest detractor during the quarter. Following robust orders during the 2020-2022 period, customer destocking persisted throughout 2023, particularly in Brazil, causing Corteva to lower 2023 revenue and profit guidance to -2% and -3% year-over-year, respectively. While the crop protection business appears to be, in our view, at or near a cyclical bottom, the seed business remained resilient, with +14% year-over-year price/mix effects more than offsetting the 12% fall in volumes during the third quarter. We are encouraged by management’s actions, including further optimization of the crop protection business and Corteva’s FREE cash flow generation during this challenging period. Despite cyclical headwinds, the company continues to execute on catalysts we previously identified, including margin expansion via improved pricing and product mix, as well as reduced royalty expenses.”
6. Martin Marietta Materials Inc (NYSE:MLM)
Number of Hedge Fund Investors: 52
Raleigh, North Carolina-based building materials company Martin Marietta Materials Inc (NYSE:MLM) shares have gained about 75% over the past one year. In February HSBC upgraded the stock to Hold from Reduce citing infrastructure demand. HSBC also upped its price target on the stock to $543 from $376.
Insider Monkey’s database of 933 funds shows that 52 hedge funds reported owning stakes in Martin Marietta Materials Inc (NYSE:MLM).
TimesSquare Capital U.S. Mid Cap Growth Strategy stated the following regarding Martin Marietta Materials, Inc. (NYSE:MLM) in its fourth quarter 2023 investor letter:
“Within Materials, we seek well positioned companies that are less susceptible to swings in commodity prices. Martin Marietta Materials, Inc. (NYSE:MLM) is a supplier of aggregates and other materials to the construction industry. Their third quarter included higher than expected earnings with inline revenues. Across its product lineup: aggregate volumes declined, cement volumes were flat, ready-mix volumes were up, and asphalt volumes were up. These results along with higher profit guidance led to a 22% increase in the stock price.”
Click to continue reading and see 5 Best Materials Stocks To Buy in 2024.
Suggested Articles:
- 11 Overvalued Stocks Insiders are Dumping Now
- 13 Cash-Rich Dividend Stocks To Buy Now
- Insiders Are Dumping These 10 Healthcare Stocks
Disclosure. None. 16 Best Materials Stocks To Buy in 2024 was initially published on Insider Monkey.