In this article, we will discuss the 12 Best Basic Materials Stocks to Buy According to Analysts.
Fitch Ratings sees a stable demand environment for North American building products and materials companies heading into 2025. This is expected to be aided by a rebound in residential remodel activity, a rise in US housing starts, and robust public construction spending amidst a slowdown in non-residential construction activity. The rating agency went on to say that building products companies garnering significant revenues from repair and remodel projects can outperform as declining interest rates fuel demand recovery.
What Lies Ahead for Steel and Commodity Chemicals?
Fitch Ratings expects a modest growth in steel output demand in North America and Europe in 2025. The rating agency anticipates that lower raw material costs in 2025 and companies’ strategic investments focused on expanding higher-margin value-added production and additional new low-cost capacity to meet demand would offer some margin support. As a result of Trump’s tariffs, Fastmarkets believes that the domestic steel industry might reap some benefits from the approach. The domestic steelmakers were in an advantageous position from the Section 232 actions which were first implemented in 2018, leading to higher steel prices and margins. As per Samir Kapadia, principal and chief operating officer at the Vogel Group (an international government affairs and consulting firm), steel prices are expected to go up, and it will be a good year for the US steel industry.
Commodity chemicals producers face higher operating leverage because a marginal volume decrease results in reduced capacity utilization, impacting profits. This happened in the past year as lower volumes and reduced capacity utilization adversely impacted the producers’ profit. However, since demand saw an improvement in H2, capacity utilization followed the lead. Morningstar projects that demand will continue to recover in 2025, resulting in increased volumes and better utilization rates. This is expected to support a recovery in profit for producers.
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Lithium Prices to Rise in 2025, Says Morningstar
The energy transition revolves around a broader lithium market, fueled by strong demand for EVs. Morningstar sees that lithium demand has been increasing from higher global EV sales and the buildout of utility-scale batteries utilized in energy storage systems. Over the near term, the firm expects increased average prices in 2025 as supply cuts are expected to move the market closer to balance, pushing the prices higher, mainly in H2. Over the medium term, Morningstar anticipates prices to average $20,000 per metric ton.
With this in mind, let us now have a look at the 12 Best Basic Materials Stocks to Buy According to Analysts
A 360 degree view of a partially constructed tower, featuring various pieces of equipment and constructionmaterials.
Our Methodology
To list the 12 Best Basic Materials Stocks to Buy According to Analysts, we used a screener to filter out the stocks catering to the basic materials sector. Next, we chose the ones in which analysts saw upside potential. Finally, the stocks were arranged in ascending order of their average upside potential, as of February 7. We also mentioned hedge fund sentiments around each stock, as of Q3 2024.
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12 Best Basic Materials Stocks to Buy According to Analysts
12) Martin Marietta Materials, Inc. (NYSE:MLM)
Average Upside Potential: 24.4%
Number of Hedge Fund Holders: 44
Martin Marietta Materials, Inc. (NYSE:MLM) is a natural resource-based building materials company, engaged in supplying aggregates and heavy-side building materials to the construction industry. Wolfe Research upped the company’s stock from “Peer Perform” to “Outperform,” while providing a new price objective of $563.00. As per the research firm, amidst concerns regarding the potential impact of elevated interest rates on construction demand and inflation affecting spending, an improvement is expected in the construction activity in H2 and into 2026. This can strengthen sustained pricing power and margin expansion for Martin Marietta Materials, Inc. (NYSE:MLM).
A renewed focus on infrastructure development is expected to result in higher demand for aggregates and construction materials, aiding the company’s core business. Talking about deregulation, reduced regulatory burdens can reduce compliance costs and streamline project approvals. This can result in increased construction activity, fueling Martin Marietta Materials, Inc. (NYSE:MLM)’s growth prospects.
Notably, Wolfe Research’s outlook demonstrates that the US Fed’s rate cut strategy is expected to play a critical role in assessing the timing of the private sector’s recovery. Baron Funds, an investment management company, released its Q2 2024 investor letter. Here is what the fund said:
“In the second quarter, we acquired shares in Martin Marietta Materials, Inc. (NYSE:MLM), a leading producer of aggregates (77% of gross profit) and specialty products. The company’s products are sold and utilized in infrastructure projects such as highways, as well as residential and non-residential construction. Martin Marietta has local leadership positions across its footprint.
We believe aggregates are an attractive business for two main reasons: High barriers to entry limit new competition: Permits to open new quarries are difficult to obtain, and the approval process typically takes 5 to 10 years. Martin Marietta has more than 75 years of aggregates reserves at its current extraction rates. Consistent pricing power through cycles: Aggregates producers have historically enjoyed great pricing power owing to the difficulty in opening competing new quarries, the limited substitutes for quality aggregates, and a high weight-to-price ratio that makes transportation expensive relative to the cost of the material. In the last 30 years, pricing of aggregates has increased, on average, 4% per year…” (Click here to read the full text)
11) Rio Tinto Group (NYSE:RIO)
Average Upside Potential: 25.9%
Number of Hedge Fund Holders: 30
Rio Tinto Group (NYSE:RIO) is engaged in exploring, mining, and processing mineral resources. The company is optimistic about the Australian Government’s announcement related to an aluminium production credit to help sustain and grow aluminium smelting in Australia, and advance both regional communities and the nation’s manufacturing capabilities. With global industrial customers and consumers focusing on low-carbon products, this support hints at Australia’s potential to be counted as a leading supplier of aluminium required for the global energy transition, creating an environment supportive of local businesses and manufacturing.
This announcement builds on Rio Tinto Group (NYSE:RIO)’s partnership with the Queensland Government to support Boyne Smelters Ltd’s transition to renewable energy, and Rio Tinto Group (NYSE:RIO)’s robust progress in securing renewable power to offer competitively priced electricity for the aluminium operations. Furthermore, Rio Tinto Group (NYSE:RIO) remained optimistic about the announcement as it has 51.55% interest in Tomago Aluminium Company and focuses on working with the New South Wales Government to help secure the future of that operation.
The company is expected to benefit from higher iron ore demand due to global infrastructure projects. Furthermore, given the favourable demand trends for aluminium, stemming from EVs, aerospace, and lightweight construction, Rio Tinto Group (NYSE:RIO) is well-placed to benefit from higher aluminium prices.
10) Cleveland-Cliffs Inc. (NYSE:CLF)
Average Upside Potential: 29.4%
Number of Hedge Fund Holders: 40
Cleveland-Cliffs Inc. (NYSE:CLF) operates as a flat-rolled steel producer in North America. The company’s evolution is dictated by a dual focus on operational efficiency and strategic acquisitions such as AK Steel, ArcelorMittal USA, and Stelco. Notably, these acquisitions have cemented Cleveland-Cliffs Inc. (NYSE:CLF)’s position as a low-cost steel producer with a vertically integrated model to include iron ore mining, steel manufacturing, and coke processing.
GLJ Research analyst Gordon Johnson upgraded the company’s shares from “Sell” to “Buy,” providing a price objective of $14.27. The upgrade stemmed from the expectations of the implementation of tariffs and typical seasonal strength in the broader steel sector. As per the analyst, these policies are expected to be applied to numerous industries, which include steel, which can fuel US Hot-Rolled Coil prices in the near term. Moreover, the analyst highlighted the historical seasonal trends favouring the broader steel industry from January to April.
Cleveland-Cliffs Inc. (NYSE:CLF) has seen improvements in its order book, both automotive and non-automotive, and the company expects that the manufacturing-friendly items on President Trump’s agenda will have an outsized benefit. The company remains focused on working with the Trump administration on further tariff action to come on steel specifically.
9) DuPont de Nemours, Inc. (NYSE:DD)
Average Upside Potential: 31.9%
Number of Hedge Fund Holders: 47
DuPont de Nemours, Inc. (NYSE:DD) offers technology-based materials and solutions. Analyst Chris Parkinson from Wolfe Research upgraded the company’s stock to a “Buy” rating, giving a price target of $91.00. The rating is backed by factors including an expected improvement in the growth trajectory for DuPont de Nemours, Inc. (NYSE:DD)’s Electronics & Industrial (E&I) and Water & Protection (W&P) segments in the second half of 2025 and 2026. The company is undervalued considering its portfolio quality, says the analyst. The company’s diverse portfolio includes numerous high-margin businesses, such as electronics, water treatment, and specialty materials.
As a result of this diversification, DuPont de Nemours, Inc. (NYSE:DD) continues to maintain a healthy market position amidst varying economic conditions. Its emphasis on innovation and capability to convert purchased plastics into high-value specialty products for numerous uses continues to act as a competitive advantage. The company recently announced an acceleration of the separation of its Electronics business and it now targets November 1, 2025 to wrap up the transaction. Also, DuPont de Nemours, Inc. (NYSE:DD) no longer plans to separate its Water business. It has evaluated all strategic alternatives and concluded that the best way to generate value is for the Water business to remain in the company’s portfolio.
Additionally, this also enhances the company’s ability to continue optimizing its portfolio following the Electronics separation. The decision to retain Water business in DuPont de Nemours, Inc. (NYSE:DD)’s structure highlights the management’s confidence in the long-term value.
8) The Chemours Company (NYSE:CC)
Average Upside Potential: 36.9%
Number of Hedge Fund Holders: 29
The Chemours Company (NYSE:CC) is a global provider of chemicals. The company delivers customized solutions with a wide range of industrial and specialty chemicals products for numerous markets. Truist initiated coverage of the company’s stock with a “Buy” rating, and a price objective of $27. As per the firm, The Chemours Company (NYSE:CC) is well-placed for strong earnings growth in 2025 and 2026, courtesy of continued growth at accretive margins for the company’s next-gen refrigerant Opteon franchise.
Furthermore, Truist expects an upside to the company’s current valuation, with the new management team implementing the plans to optimize The Chemours Company (NYSE:CC)’s cost structure and target growth in higher-value product applications. The company remains focused on numerous strategic initiatives to enhance its competitive position and fuel growth. As a result, its key focus has been on cost reduction, with The Chemours Company (NYSE:CC) expecting to achieve incremental run-rate cost savings of more than $250 million throughout the company from 2024 through 2027.
This will consist of a continuation of successful cost reductions via the TT (Titanium Technologies) Transformation Plan, adding an incremental $100 million in expected cost savings, plus $150 million in targeted cost savings throughout other businesses and corporate costs. The Chemours Company (NYSE:CC) plans to apply a programmatic approach to achieve the targets, using its manufacturing capabilities, standardized operating model, and continuous improvement to adapt to ever-changing markets. Buckley Capital Advisors, an investment management company, released a Q3 2024 investor letter. Here is what the fund said:
The Chemours Company (NYSE:CC) is an investment we have owned since 2018, very profitably until this year. It is composed of 3 different businesses – TSS, APM, and TT – that are each the #1 or #2 players in their respective categories.
The company’s Thermal & Specialized Solutions division (TSS) sells environmentally friendly refrigerants on a global basis, with the primary refrigerants being Opteon and Freon. Opteon is more environmentally friendly, therefore Freon is being slowly phased out by government mandate. This is very beneficial for Chemours since Opteon is very high-margin and has little competition, whereas Freon has more competitors and overall lower margins. This should lead to high single-digit growth in the TSS segment, with 30%+ EBITDA margins. We believe it is possible TSS margins could get to 40%, given that they have neared that number in the past and that as Chemours sells more Opteon, its margins should trend higher. This means TSS should be able to earn around $800m in EBITDA in the next 2 years…” (Click here to read the full text)
7) Albemarle Corporation (NYSE:ALB)
Average Upside Potential: 39.5%
Number of Hedge Fund Holders: 35
Albemarle Corporation (NYSE:ALB) is engaged in developing, manufacturing, and marketing engineered specialty chemicals. Truist initiated coverage of the company’s stock with a “Hold” rating and a price objective of $96. As per the firm, Albemarle Corporation (NYSE:ALB)’s scale and relatively low-cost production footprint place it well over the long term to capitalize on the growth opportunities in the broader lithium market. Truist Securities lauded the company’s large-scale operations and cost-efficient production. The firm expects that these strengths will help the company tap opportunities in the growing demand for lithium, which remains a key component in EV batteries.
Albemarle Corporation (NYSE:ALB)’s vertical integration and diversified asset base are expected to allow the company to ramp up production rapidly to meet increased demand for lithium, resulting in enhancing market share and realizing significant profits. Notably, the expansion of EVs will remain a critical driver of broader lithium demand. The global EV adoption is expected to increase mainly because of government incentives, and advancement in battery technology. Therefore, Albemarle Corporation (NYSE:ALB) stands to gain from higher lithium prices because of its long-term supply agreements and cost-effective operations.
Albemarle Corporation (NYSE:ALB) has announced a new operating structure to adapt to dynamic market conditions. Its operating structure is expected to pivot from 2 core global business units – Energy Storage and Specialties – to a fully integrated functional model focused on increasing agility, delivering numerous cost savings, and maintaining competitiveness.
6) Alcoa Corporation (NYSE:AA)
Average Upside Potential: 39.8%
Number of Hedge Fund Holders: 42
Alcoa Corporation (NYSE:AA) is engaged in producing and selling bauxite, alumina, and aluminum products. Morgan Stanley analyst Carlos De Alba gave a “Buy” rating on the company’s stock, setting a price target of $51.00. The analyst’s rating stems from a combination of factors, including the company’s strategic initiatives to improve efficiency and cut costs, together with the reduction in risks related to bauxite mining in Western Australia. Elsewhere, Analyst Lawson Winder from Bank of America Securities reiterated a “Buy” rating on Alcoa Corporation (NYSE:AA)’s stock, giving a price target of $58.00.
Winder’s rating is based on numerous positive strategic and market factors. As per the analyst, Alcoa Corporation (NYSE:AA) reported Q4 2024 adjusted EBITDA that was in line with expectations, showcasing stable financial performance. Notably, the company’s adjusted EBITDA, excluding special items, came in at $677 million in Q4 2024, an increase from $455 million in Q3 2024. Furthermore, Alcoa Corporation (NYSE:AA) continues to work on improving profitability at its San Ciprián site and has been exploring monetization of idle assets together with debt repayment strategies, which can enhance its financial position.
Analyst Lawson Winder believes that Alcoa Corporation (NYSE:AA) has promising prospects because of the expected strong demand for aluminum, courtesy of supply constraints and gradual alumina price normalization. The company’s significant aluminum production capacity, together with its competitive cost structure in bauxite and alumina, places Alcoa Corporation (NYSE:AA) in a favorable position to capitalize on favourable market dynamics.
5) Westlake Corporation (NYSE:WLK)
Average Upside Potential: 41.2%
Number of Hedge Fund Holders: 38
Westlake Corporation (NYSE:WLK) is engaged in the manufacturing and marketing of performance and essential materials, and housing and infrastructure products. Truist initiated coverage of the company’s stock with a “Buy” rating and a price objective of $168. The firm expects an upside to Westlake Corporation (NYSE:WLK)’s current valuation, considering that its significant cash balance offers an opportunity for either expansion of the Housing & Infrastructure Products portfolio through marketing and acquisitions or higher return of cash to shareholders. As of September 30, 2024, the company had cash and cash equivalents of $2.91 billion.
Westlake Corporation (NYSE:WLK)’s Housing and Infrastructure Products business is expected to outperform the broader building products market. This outperformance is expected to be mainly driven by national scale and product breadth, and integrated PVC dynamics. This business, which includes building products and related materials, relies on the performance of the broader housing market activity. With the increase in housing starts and renovation activities, the demand for Westlake Corporation (NYSE:WLK)’s products including PVC pipes and windows is expected to improve.
This can result in increased sales volumes and potentially improved pricing power. Furthermore, a housing market recovery can have positive spillover effects on Westlake Corporation (NYSE:WLK)’s Performance and Essential Materials business. Notably, higher demand for PVC in construction can mitigate some of the challenges in the chemical sector, resulting in improved margins.
4) Celanese Corporation (NYSE:CE)
Average Upside Potential: 44.01%
Number of Hedge Fund Holders: 15
Celanese Corporation (NYSE:CE) is a chemical and specialty materials company engaged in manufacturing and selling high-performance engineered polymers. Deutsche Bank analysts maintained a “Buy” rating on the company’s shares, providing a price objective of $85.00. The analysts remain optimistic about the company’s operating leverage, mainly as markets in the automotive, industrial, and construction sectors are well-positioned for a recovery. Celanese Corporation (NYSE:CE)’s focus remains on driving business improvement via earnings growth, cost reductions, FCF expansion, and deleveraging to position itself for long-term shareholder value creation.
A recovery in industrial markets, mainly in the automotive and construction sectors, is expected to offer a significant upside for Celanese Corporation (NYSE:CE). As a rebound in the demand occurs, its high-margin acetyls and engineered materials segments can capitalize on increased volumes and better pricing power. Also, this recovery can fuel faster-than-expected earnings growth. The growth in sectors such as automotive, electronics, and medical continues to fuel demand for engineered materials. Celanese Corporation (NYSE:CE) produces specialty polymers for a range of industries such as automotive and energy.
Furthermore, the acetyl chain segment benefits from improvements in industrial and construction activity. Overall, Celanese Corporation (NYSE:CE) remains well-placed to gain from increased demand, pricing power, and sustainability trends.
3) Freeport-McMoRan Inc. (NYSE:FCX)
Average Upside Potential: 46.5%
Number of Hedge Fund Holders: 74
Freeport-McMoRan Inc. (NYSE:FCX) is engaged in the mining of mineral properties. Carlos De Alba, an analyst from Morgan Stanley, maintained a “Buy” rating on the company’s stock, maintaining the price target of $55.00. The rating stems from several factors surrounding the company’s recent performance and future potential. Despite mixed Q4 2024 results, the analyst believes that Freeport-McMoRan Inc. (NYSE:FCX) has demonstrated its ability to manage costs and capitalize on positive market conditions. Amidst concerns relating to increased costs and lower copper sales in the near term, the company’s initiatives and planned capital expenditures, such as investments in smelting operations in Indonesia, place it well for long-term growth and profitability, says the analyst.
The analyst also opines that Freeport-McMoRan Inc. (NYSE:FCX) is well-placed to benefit from favorable trends in copper and gold prices. The optimism around the company’s stock is affected by its strategic positioning in the market. Notably, the scarcity of pure copper investment opportunities and expected copper deficits continue to enhance Freeport-McMoRan Inc. (NYSE:FCX)’s appeal.
The company continues to operate in a competitive global mining industry, but the strong asset base and operational expertise place it well among its peers. Freeport-McMoRan Inc. (NYSE:FCX)’s focus on copper production is expected to support growth given the favourable outlook for the metal.
2) Vale S.A. (NYSE:VALE)
Average Upside Potential: 47.8%
Number of Hedge Fund Holders: 41
Vale S.A. (NYSE:VALE) is engaged in producing and selling iron ore, iron ore pellets, nickel, and copper in Brazil and internationally. Analyst Caio Ribeiro from Bank of America Securities maintained a “Hold” rating on the company’s stock. The rating stems from a combination of factors related to the company’s recent performance and market conditions. As per the analyst, Vale S.A. (NYSE:VALE)’s production and sales numbers for iron ore remained largely in line with expectations, although they were marginally below the consensus estimates. Notably, iron ore production totaled 85.3 Mt in Q4 2024, 4.1 Mt lower YoY. Iron ore sales came in at 81.2 Mt, 9.1 Mt (-10%) lower YoY, due to the decision to reduce high-silica products sales in the quarter, improving all-in premiums.
Despite these numbers, the analyst believes that the realized prices for their products, mainly iron ore, exceeded expectations, which contributed positively to Vale S.A. (NYSE:VALE)’s earnings potential. The company’s strategic focus extends to its base metals business, an area where growth opportunities exist despite the recent challenges. With increasing global demand for EVs and renewable energy technologies, the broader long-term outlook for base metals such as nickel and copper is positive. Vale S.A. (NYSE:VALE)’s established presence in such markets places it well to capitalize on future demand growth.
White Falcon Capital Management, an investment fund manager, released its Q4 2024 investor letter and mentioned Vale S.A. (NYSE:VALE). Here is what the fund said:
“While this uncertainty in Brazil has prompted many investors to offload Brazilian stocks, we’ve taken advantage of this environment to establish a position in Vale S.A. (NYSE:VALE). Vale is among the world’s largest and lowest-cost iron ore producers and boasts a growing portfolio of high-demand copper and nickel assets. It is currently trading at a P/E of 5.3x with a 8% dividend yield.”
1) Olin Corporation (NYSE:OLN)
Average Upside Potential: 64.7%
Number of Hedge Fund Holders: 33
Olin Corporation (NYSE:OLN) is engaged in manufacturing and distributing chemical products. BofA Securities analysts upped the company’s stock from “Neutral” to “Buy”. The analysts opine that the company has the best FCF yield within their commodity coverage. Olin Corporation (NYSE:OLN) remains in a shielded position from the associated risks because of the limited exposure to China and significant operations in the US, which can gain from the expected lower taxes.
BofA Securities believes that the company’s EBITDA is expected to increase in 2025. This optimistic outlook is backed mainly by the expectation that Olin Corporation (NYSE:OLN) will not encounter the same severe hurricane-related disruptions it witnessed earlier. Furthermore, increased caustic soda prices and epoxy volumes, together with marginal improvement in demand, can contribute to Olin Corporation (NYSE:OLN)’s financial recovery. Moving forward, expected interest rate cuts in 2025 might help in the recovery in Building & Construction (B&C) sector, which can be particularly beneficial for the company.
Notably, Olin Corporation (NYSE:OLN) remains well-placed to capitalize on a recovery in industrial end-markets, considering robust operational leverage and strategic market positioning. Given its position as a global leader in the chlor-alkali sector, the company possesses the potential to witness strong earnings improvement as and when demand recovers.
While we acknowledge the potential of OLN as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued AI stock that is more promising than OLN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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