Top materials stocks this month include Patriot Battery Metals Inc. (PMETF), Sigma Lithium Corp. (SGML), and Snowline Gold Corp. (SNWGF), the prices of which have each more than doubled in the last year.
The materials sector includes companies that discover, develop, and process raw materials used in industries such as steelmaking, farming, and construction. Materials stocks include manufacturers of plastics, fertilizers, paper, concrete, and metals. Prominent companies include Ecolab Inc. (ECL), Air Products and Chemicals Inc. (APD), and DuPont de Nemours Inc. (DD).
The prices of several metals and agricultural products climbed in 2022 after Russia’s invasion of Ukraine disrupted global trade and markets, fueling rallies in selected materials stocks. Prices have since pulled back as markets have adapted and a global campaign of interest rate hikes has tempered demand.
Here are the top three materials stocks with the best value, the fastest growth, and the most momentum. All data in the tables below is as of March 31.
Best Value Materials Stocks
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 that you’re paying less for each dollar of profit generated.
|Best Value Materials Stocks|
|Price ($)||Market Capitalization (Market Cap) ($B)||12-Month Trailing P/E Ratio|
|Cemex S.A.B. de C.V. (CX)||5.42||7.9||0.5|
|Alpha Metallurgical Resources Inc. (AMR)||153.39||2.3||2.0|
|Ferroglobe PLC (GSM)||4.85||0.9||2.0|
- Cemex S.A.B. de C.V.: Located in Mexico, Cemex provides building materials such as ready-mix concrete, asphalt products, roofing tiles, drainage basin barriers, and concrete pipes for sewer systems. Cemex recently made headlines when competitor Vulcan Materials, the largest construction aggregates producer in the U.S., alleged Mexican police seized its quarry in the Mexican province of Quintana Roo and allowed Cemex to unload cargo at the site. Cemex leased part of the port until December when its agreement with Vulcan expired, and the companies failed to agree on a renewal.
- Alpha Metallurgical Resources Inc.: Alpha Metallurgical is a mining company operating in West Virginia and Virginia. The company owns 15 underground mines to supply the steel industry with metallurgical coal. Net income fell 14% in the fourth quarter of 2022, while revenue was unchanged from the previous year. The company authorized a $1.2 billion stock buyback program in 2022. As of Jan. 31. the company had repurchased 3.8 million shares for approximately $560 million.
- Ferroglobe PLC: Ferroglobe is a U.K.-based supplier of silicon and manganese-based alloys used for various products, from personal care items to electronics and construction materials. Falling prices cut into earnings in the final quarter of 2022. A 21% drop in revenue year-over-year led to a 45% decline in net income for the quarter.
Fastest Growing Materials Stocks
These are the top materials stocks as ranked by a growth model that scores companies based on a 50/50 weighting of their most recent quarterly year-over-year (YOY) percentage revenue growth and most recent quarterly YOY earnings-per-share (EPS) growth. Both sales and earnings are critical factors in the success of a company. Therefore, ranking companies by only one growth metric makes a ranking susceptible to the accounting anomalies of that quarter (such as changes in tax law or restructuring costs) that may make one figure or the other unrepresentative of the business in general. Companies with quarterly EPS or revenue growth of more than 1,000% were excluded as outliers.
|Fastest Growing Materials Stocks|
|Price ($)||Market Cap ($B)||EPS Growth (%)||Revenue Growth (%)|
|Gevo Inc. (GEVO)||1.54||0.4||N/A (see company description)||909|
|Livent Corp. (LTHM)||21.78||3.9||875||79|
|Sociedad Química Y Minera de Chile S.A. (SQM)||81.4||23.3||258||189|
- Gevo Inc.: Gevo is a green energy company that sells alternative fuels, such as sustainable aviation fuel, renewable gasoline and diesel, renewable natural gas, and ethanol. Note Gevo doesn’t have an EPS growth figure in the table above because the company reported negative EPS in the most recent quarter.
- Livent Corp.: Livent is a pure-play producer of lithium compounds for applications such as EV batteries, polymers, and pharmaceuticals. The company reported fourth-quarter earnings on Feb. 14, with net income surging 11-fold to $83 million. Livent expanded its lithium extraction operations in North and South America in 2022. The company also entered a long-term deal in 2022 with General Motors to supply lithium hydroxide for the carmaker’s EV batteries over a six-year period starting in 2025.
- Sociedad Química Y Minera de Chile S.A.; Sociedad Química is a Chilean mining company that produces plant nutrients, lithium and iodine products, and industrial chemicals.
Materials Stocks with the Most Momentum
These are the materials stocks that had the highest total return over the past 12 months.
|Materials Stocks with the Most Momentum|
|Price ($)||Market Cap ($B)||12-Month Trailing Total Return (%)|
|Patriot Battery Metals Inc. (PMETF)||CA$13.70||CA$1.3||938|
|Sigma Lithium Corp. (SGML)||38.36||4.0||191|
|Snowline Gold Corp. (SNWGF)||CA$2.75||CA$0.4||184|
|Russell 1000 Index||N/A||N/A||-11|
|S&P 500 Basic Materials Index (XLB)||N/A||N/A||-10|
- Patriot Battery Metals Inc.: Patriot Battery is a Canadian-based company that owns mineral properties for the exploration of lithium, copper, gold, and platinum deposits.
- Sigma Lithium Corp.: Sigma is a lithium mining company that operates four properties in southeastern Brazil.
- Snowline Gold Corp.: Snowline Gold is a gold exploration company with multiple properties located in the Yukon in northwestern Canada. On March 28, Snowline and B2Gold completed an agreement by which B2Gold invested CA $19.2 million to purchase approximately 4 million common shares of Snowline Gold, making B2Gold a 5% owner of Snowline Gold.
Advantages of Investing in Materials Stocks
Core Demand: Materials are the foundations of the global economy, required to build everything from microchips and luxury cars to lightbulbs and toilet paper. While the price of certain materials rises and falls with supply and demand, companies in this sector enjoy a degree of demand stability that sectors like consumer discretionary, tech, and communications do not.
Portfolio Hedge: Materials companies that mine for precious metals, such as gold and silver, provide investors with a partial hedge against cyclical holdings in their portfolio, often outperforming during market downturns. During times of economic instability with higher inflation and interest rates, materials companies withstand difficulties with solid dividend growth and healthy cash flows.
Risks of Investing in Materials Stocks
Rising Costs: Materials companies face periods of rising costs that can crimp earnings, especially if they coincide with falling commodity prices. Mining and developing resources is capital intensive. Supply chain disruptions, rising fuel costs, and machinery maintenance can cause significant challenges, particularly during periods of spiking inflation. For example, pandemic-related shipping snarls in 2021 saw the benchmark price to ship copper in the U.S. reach its highest level since 2003.
Industrial Action: Certain industries within the material sector, such as mining, are heavily unionized, increasing the risk of industrial action that can temporarily suspend or reduce operations. A reduction in output has the potential to impact a mining company’s earnings which can put downward pressure on its share price. In 2021, iron-ore mining giant Rio Tinto Group (RIO) had to reduce one of its mines to 25% capacity for several months due to strike action, which union officials claimed cost the company around $5 million daily.
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