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.
A crane carrying heavy building materials, representing the robust civil engineering products of the company.
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.
8. DuPont de Nemours, Inc. (NYSE:DD)
Number of Hedge Fund Holders: 58
DuPont de Nemours, Inc. (NYSE:DD) is a diversified worldwide specialty chemicals firm founded in 2019 as a result of the DowDuPont merger and subsequent separations. Its range comprises downstream goods and specialty chemicals that cater to the water, construction, electronics, safety and protection, automotive, and healthcare sectors. By the end of 2025, the firm intends to separate its electronics division.
The company’s revenue rose by 7% in the fourth quarter of 2024, while operational EBITDA grew by 13% year over year to $807 million. Adjusted EPS increased 30% over the previous year, while the operating EBITDA margin increased 140 basis points. The demand for semiconductors and applications of AI technology drove double-digit organic sales growth in the Electronics and Industrial Solutions division. E&I had a 10% rise in organic revenue and a 21% increase in operational EBITDA. DuPont de Nemours, Inc. (NYSE:DD)’s sales of AI-related products surged 30%, generating over $300 million and making it one of the best materials stocks.
Nonetheless, BMO Capital maintained its Outperform rating on its shares and increased DuPont de Nemours, Inc. (NYSE:DD)’s price objective from $112 to $116. In a research note, the analyst informs investors that the stock is one of the more appealing prospects in the chemical industry, delivering strong value unlock over the next six to twelve months. According to the company, gains are anticipated from exposure to end markets that are stable or improving, as well as from its upcoming separation into ElectronicsCo and New DuPont.
7. Ecolab Inc. (NYSE:ECL)
Number of Hedge Fund Holders: 59
Ecolab Inc. (NYSE:ECL) is included in the list of the best materials stocks. It manufactures and distributes cleaning and sanitation solutions for the life sciences, healthcare, hospitality, and industrial manufacturing markets. Being the industry leader in cleaning and sanitation, the firm offers products that assist its clients in the hospitality, food service, and life sciences sectors with laundry, dishwashing, maintaining hygienic manufacturing facilities, and guaranteeing regulatory compliance. The company has a strong razor-and-blade business model and unparalleled scale, which provides it a distinct competitive edge. The scale of its sanitation and cleaning surpasses that of its competitors. The business makes more than twice as much money as its largest competitor. Many of its markets are composed of local and regional competitors, and its industries are fragmented. About 9% of the $152 billion global market is controlled by the firm. The business attracts international manufacturing, food service, and hospitality companies as partners.
Ecolab Inc. (NYSE:ECL) reported $4 billion in revenue for the fourth quarter of 2024, which is a growth of around 2% year over year. Stronger growth in its Industrial and Healthcare & Life Sciences segments, along with ongoing strong performance in its Pest Elimination and Institutional & Specialty divisions, were the main drivers of the 4% surge in organic sales. Although overseas markets also reported favorable results, the impact of differing macroeconomic conditions was somewhat mitigated by new business gains. The United States led the region in terms of organic sales growth. The operational income margin of the business was 14.6%.
The company’s operating cash flow of $2.8 billion and free cash flow of $1.8 billion in FY24 demonstrated a strong financial position. For 33 years in a row, Ecolab Inc. (NYSE:ECL) was able to raise dividends due to its strong cash flow.
6. Air Products and Chemicals, Inc. (NYSE:APD)
Number of Hedge Fund Holders: 60
An American international company, Air Products and Chemicals, Inc. (NYSE:APD) is focused on performance materials, industrial gases, and associated equipment and services.
The company is a major player in the infrastructure for hydrogen fuel and one of the biggest suppliers of merchant hydrogen worldwide. Air Products and Chemicals, Inc. (NYSE:APD) can create 7 million kg of fuel per day with more than 100 hydrogen plants. By concentrating on gasification, carbon capture, and clean hydrogen, the company intends to be at the forefront of tackling global energy and environmental concerns. The firm is now engaged in a number of large-scale hydrogen projects that should be finished in the upcoming years. Developing the largest blue hydrogen facility in the world is one of its main initiatives, which will cost $4.5 billion in Louisiana. The facility is expected to capture and store more than 5 million metric tons of carbon dioxide per year once it is operational. The stock grew by nearly 10% in the past year, making it one of the best materials stocks.
Aristotle Value Equity Strategy stated the following regarding Air Products and Chemicals, Inc. (NYSE:APD) in its Q1 2025 investor letter:
“Founded in 1940 and with headquarters in Pennsylvania, Air Products and Chemicals, Inc. (NYSE:APD) and Chemicals is a leading global supplier of industrial gases, including oxygen, nitrogen, helium, hydrogen and others. These essential gases serve critical roles across a wide range of industries, such as refining, chemicals, metals, electronics, manufacturing, healthcare, and food manufacturing and packaging. Air Products is the leading global supplier of hydrogen, with a robust distribution network across North America.
Roughly 50% of the company’s revenue is generated through onsite delivery. This method usually entails 15- to 20-year contracts where Air Products builds a facility at the customer’s site or nearby (or delivers the gases through pipeline systems).
These long-term contracts tend to include pass-through and take-or-pay provisions, which provide stability and predictability of cash flows. The company’s merchant gases (roughly 35% of revenue) are delivered in bulk by tanker in either liquid or gas form, usually under five-year contracts, providing a steady but more variable revenue stream. Smaller quantities can also be delivered to customers, usually packaged in cylinders. (This business represents less than 15% of revenue.) …” (Click here to read the full text)
The company’s revenue in fiscal Q1 2025 was $2.9 billion, which was 2% less than the year before. The main causes of this decline were a 1% negative currency impact and a 2% decline in sales volume, which were somewhat countered by a 1% price rise. The sale of Air Products and Chemicals, Inc. (NYSE:APD)’s LNG business in September 2024 and decreased contributions from merchant and on-site activities in Europe were the main causes of the volume fall. However, a one-time, sizable helium sale to an existing merchant customer in the Americas helped to offset these difficulties to some extent. The impact on revenues from the LNG divestiture alone was about 2%.
5. Newmont Corporation (NYSE:NEM)
Number of Hedge Fund Holders: 69
Newmont Corporation (NYSE:NEM) is the largest gold miner in the world. In 2019, it acquired Goldcorp, and later that year, it merged its Nevada mines into a joint venture with rival Barrick. In November 2023, it acquired competitor Newcrest. Its holdings in two joint ventures and 17 fully or majority-owned mines throughout the Americas, Africa, Australia, and Papua New Guinea are part of its portfolio. After selling six higher-cost, smaller mines, the business is anticipated to sell about 5.5 million ounces of gold from its core mines in 2025, most likely starting in the middle of the same year. The firm also generates significant amounts of copper, silver, zinc, and lead as byproducts. At the end of December 2024, it possessed substantial byproduct reserves in addition to roughly 20 years’ worth of gold reserves.
Newmont Corporation (NYSE:NEM) generated $2.9 billion in free cash flow in 2024, including a record $1.6 billion in Q4, due to robust cash flow management, increased sales, and high gold prices. The business paid off $1.4 billion in debt, bringing its total debt below $8 billion, maintained a healthy balance sheet with $3.6 billion in cash, and distributed $2.3 billion in dividends and stock buybacks to shareholders in 2024.
In 2024, Newmont Corporation (NYSE:NEM) exceeded its production target, producing 6.8 million ounces of gold and over 150,000 tons of copper, with 85% coming from its core portfolio. It successfully sold or secured definite agreements to sell all six of its non-core businesses, potentially generating up to $4.3 billion in pretax profits, with about $2.5 billion in cash proceeds expected in the first half of 2025.
4. Linde plc (NASDAQ:LIN)
Number of Hedge Fund Holders: 70
Linde plc (NASDAQ:LIN) is the world’s biggest industrial gas provider, operating in over 100 different countries. The company’s primary products include equipment for industrial gas production, process gases (such as hydrogen, carbon dioxide, and helium), and atmospheric gases (such as oxygen, nitrogen, and argon). It provides services to various end markets, including steelmaking, manufacturing, chemicals, and healthcare. In 2024, the firm made around $33 billion in revenue. It is among the best materials stocks.
In 2024, the business achieved impressive success, investing $2 billion in the DOW (Canada) project for low-carbon (blue) hydrogen generation and landing over 59 modest on-site contracts for sustainable energy provision. Over 40% of Linde plc (NASDAQ:LIN)’s overall power consumption is now low-carbon, with the company increasing its active low-carbon and renewable energy usage by 19% year over year. The business made $4.8 billion in total investments in its operations. The operating margin improved to 29.5%, a 190-basis-point improvement from 2023, while annual sales hit $33 million, a modest increase from $32 million in 2023.
In 2024, Linde plc (NASDAQ:LIN) generated a healthy $9.4 billion operating cash flow. After deducting new issuances, the firm disbursed $7.1 billion to shareholders in dividends and share repurchases and set aside $4.5 billion for capital expenditures. For the last 31 years in a row, the company has been paying out growing dividends to its stockholders.
3. The Sherwin-Williams Company (NYSE:SHW)
Number of Hedge Fund Holders: 74
In the US, The Sherwin-Williams Company (NYSE:SHW) is the biggest supplier of architectural paint. The company sells higher-quality paint at higher prices than most of its rivals, and it has more than 5,000 stores. The firm also supplies coatings for original equipment manufacturers and distributes its goods at big-box retailers. Over three-quarters of its operations take place in North America, and the 2016 acquisition of Valspar gave it significant worldwide exposure. Since Valspar’s long-standing relationship with Lowe’s resulted in an exclusive collaboration for the company in 2018, the acquisition has strengthened its previously limited retail footprint. Moreover, it expanded its performance coatings section by acquiring Valspar’s industrial business. The stock surged by over 8% in the last year, making it on our list of the best material stocks.
The Sherwin-Williams Company (NYSE:SHW) reported $5.3 billion in revenue for the fourth quarter of 2024, a 1% rise over the same time the previous year. Price changes and increasing demand for new residential construction and repainting projects drove an uptick of 3.4% in net sales for the company’s Paint Stores Group to $3.04 billion. The segment’s profit surged 6.9% to $606.4 million due to effective pricing measures.
In 2025, the management anticipates that adjusted EPS will be between $11.65 and $12.05. Diluted net income per share will be between $10.70 and $11.10. The Sherwin-Williams Company (NYSE:SHW) maintains its optimism despite acknowledging potential demand issues, concentrating on growing its market share, and using technology to aid in expansion.
2. Freeport-McMoRan Inc. (NYSE:FCX)
Number of Hedge Fund Holders: 88
Freeport-McMoRan Inc. (NYSE:FCX) is ranked second on our list of the best material stocks. It owns a stake in ten copper mines, including 49% of the Grasberg copper and gold operations in Indonesia, 55% of the Cerro Verde mine in Peru, and 72% of Morenci in Arizona. In 2024, it sold around 1.2 million metric tons of copper (its share), ranking among the biggest copper miners globally in terms of volume. Furthermore, it sold 70 million pounds of molybdenum and roughly 900,000 ounces of gold, primarily from Grasberg. The firm had around 25 years of copper reserves at the end of December 2024.
In 2024, Freeport-McMoRan Inc. (NYSE:FCX) improved its EBITDA by 14% to $10 billion. By increasing the leach opportunity, the company’s 2025 projection aims to achieve a run rate of 300 million pounds by the end of 2025. Furthermore, the business is moving forward with several organic growth initiatives that should increase the value of its stock in the years to come. The brownfield expansions in South America and the United States are included in this. These events have resulted in a favorable forecast for the business in 2025.
Morgan Stanley increased its target price for Freeport-McMoRan Inc. (NYSE:FCX) from $44 to $45 per share. Global GDP continues to slow, and recession fears will continue to pose challenges for mining companies, according to the analyst, who still prefers base metal equities over iron ore names in the firm’s Americas Metals and Mining coverage due to tighter supply outlooks.
1. CRH plc (NYSE:CRH)
Number of Hedge Fund Holders: 90
CRH plc (NYSE:CRH) has redefined itself as a one-stop shop for construction customers by combining upstream and downstream operations. As the biggest roadbuilder in North America, the firm stands to gain from newly passed U.S. legislation that increases financing for highway and road construction by 50%. Strong profitability indicators are a result of a healthy price environment for building materials, which is supported by funding certainty for US infrastructure projects, reshoring activity, and high entry barriers for upstream building supplies. The stock climbed by more than 9% over the past year, making it the best materials stock.
CRH plc (NYSE:CRH) reported $8.9 billion in revenue and $0.7 billion in net income for the fourth quarter of 2024. These figures rose by 2% and 24% year over year, respectively. A favorable price mix, operational efficiency, and acquisitions helped to boost adjusted EBITDA by 12% to $1.8 billion. EPS also rose 4% to $1.03. The business acquired 40 companies for $5 billion in 2024, including a $2.1 billion cement and concrete deal in Texas. Furthermore, it sold assets worth $1.4 billion, mostly Lime operations in Europe.
CRH plc (NYSE:CRH) was given a Buy rating by Truist Securities, with a price objective of $120. Keith Hughes, an analyst, believes that the European construction market has a lot of potential, particularly given Germany’s stimulus expenditure and Ukraine’s projected reconstruction efforts. Since Europe accounts for 28% of its income, the firm’s US investors have exclusive access to the expansion of the region.
Overall, CRH ranks first among the 11 Best Materials Stocks to Buy According to Hedge Funds. While we acknowledge the potential of material companies, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. If you are looking for an AI stock that is more promising than CRH but that trades at less than 5 times its earnings, check out our report about this cheapest AI stock.
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