12 Best Materials Stocks to Buy Now

Published on August 18, 2022 at 2:34 pm by Omer Farooq in Hedge Funds, News

In this article, we will look at the 12 best materials stocks to buy now. If you want to explore similar stocks, you can also take a look at 5 Best Materials Stocks to Buy Now.

Inflation, rising interest rates, and supply chain difficulties are the usual suspects that have an impact on the performance of the materials sector. In February 2022, when Russia invaded Ukraine, the prices of commodities skyrocketed and caused a rally in stocks of energy and materials. JPMorgan analyst, Dominic O’Kane, told the Financial Times:

“Events in Russia and Ukraine are unleashing exceptional commodity price moves, which could have structural implications on long-term supply . . . but we also believe there are credible threats of demand destruction as commodity prices melt up.”

Soaring commodity prices resulted in record-high inflation across the globe, causing central banks to raise interest rates to slow down the economy and anchor inflation expectations. On rising fears of a recession and macro uncertainty, commodity prices took a tumble in July 2022. UBS analysts shared their outlook on global commodity prices and how they are tied to inflation. According to UBS, the decline in commodity prices is expected to be short-lived and commodity prices are expected to remain elevated in the long term. UBS analysts see brent crude oil trading at $130 per barrel by September 2022 and then averaging around $125 through the first half of 2023. Further, UBS analysts noted that they see the recovering demand in China to support higher prices for base metals over the next six to twelve months.

While commodities have had a volatile year in 2022, investors are still betting big and are increasingly bullish on the materials sector. As of August 16, the S&P GSCI index, a benchmark to measure commodity performance over time, has gained more than 15% year to date. Some of the top materials stocks investors are piling into are Freeport-McMoRan Inc. (NYSE:FCX), Alcoa Corporation (NYSE:AA), and The Mosaic Company (NYSE:MOS).

Photo by Russ Ward on Unsplash

Our Methodology

To determine the 12 best materials stocks to buy now, we reviewed the top companies that are dominating the industry. We narrowed our selection to stocks that had positive market sentiment associated with them. In addition to each company’s products and business fundamentals, we have mentioned the analyst rating and hedge fund sentiment for each of our picks. We have ranked these stocks in increasing order of hedge fund holders.

Best Materials Stocks to Buy Now

12. Summit Materials, Inc. (NYSE:SUM)

Number of Hedge Fund Holders: 21

Summit Materials, Inc. (NYSE:SUM) produces and sells construction materials and related downstream products for the public infrastructure, and residential and non-residential end markets. The company operates through three segments: West, East, and Cement. The company’s products include aggregates, cement, ready-mix concrete, asphalt paving mixes, concrete products, and plastic components.

On August 3, Summit Materials, Inc. (NYSE:SUM) released earnings for the fiscal second quarter of 2022. The company reported earnings per share of $0.60 and beat estimates by $0.07. The company’s revenue for the quarter amounted to $631.92 million, up 2.12% year over year. As of August 16, the stock has a trailing twelve-month PE ratio of 13.59 and free cash flows of $94.69 million.

On July 14, Wolfe Research analyst Timna Tanners revised her price target on Summit Materials, Inc. (NYSE:SUM) to $28 from $41 and reiterated an Outperform rating on the shares.

At the close of Q1 2022, 21 hedge funds held stakes in Summit Materials, Inc. (NYSE:SUM) worth $119.04 million. This is compared to 24 positions in the previous quarter with stakes worth $136.62 million.

In the second quarter of 2022, Millennium Management raised its stakes in Summit Materials, Inc. (NYSE:SUM) by 115%, bringing them to $20.82 million. As of June 30, Millennium Management is the most prominent shareholder in the company.

11. MP Materials Corp. (NYSE:MP)

Number of Hedge Fund Holders: 25

MP Materials Corp. (NYSE:MP) owns and operates rare earth mining and processing facilities. The company offers cerium, lanthanum, neodymium, praseodymium, and samarium. As of August 16, MP Materials Corp. (NYSE:MP) has gained 9.51% over the past twelve months and the company has trailing twelve-month free cash flows of $72.10 million.

On August 4, MP Materials Corp. (NYSE:MP) released earnings for the fiscal second quarter of 2022. The company reported earnings per share of $0.43 and beat estimates by $0.08. The company’s revenue for the quarter amounted to $143.56 million, up 96.34% year over year, and beat expectations by $14.82 million.

On August 5, Baird analyst Ben Kallo raised his price target on MP Materials Corp. (NYSE:MP) to $55 from $45 and reiterated an Outperform rating on the shares. Kallo is bullish on the stock and noted that the company reported market-beating earnings and continues to execute optimally with record-high production volumes.

At the close of Q1 2022, 25 hedge funds were long MP Materials Corp. (NYSE:MP) with stakes worth $3.50 billion. This is compared to 24 positions in the previous quarter with stakes worth $3.01 billion. The hedge fund sentiment for the stock is positive.

As of June 30, JHL Capital Group owns 38.17 million shares of MP Materials Corp. (NYSE:MP) and is the largest shareholder in the company. The fund’s stakes in the company are valued at $1.22 billion.

Here is what Bernzott Capital Advisors had to say about MP Materials Corp. (NYSE:MP) in its “US Small Cap Value Fund” first-quarter 2022 investor letter:

“MP Materials (NYSE:MP): This rare earth specialty materials company reported solid earnings driven by higher production and selling prices of neodymium-praseodymium (NdPr), a vital component for the development of magnets used in EV production, wind turbines, drones, robotics, and other industrial applications. Also contributing were offtake agreements with General Motors for magnets and expansion plans for domestic production of magnets making MP the only domestic producer. The balance sheet and cash flow generation remain strong, supportive of expansion plans in the current NdPr pricing environment.”

Stocks in the materials sector that have received consensus Buy ratings from analysts include MP Materials Corp. (NYSE:MP), Freeport-McMoRan Inc. (NYSE:FCX), Alcoa Corporation (NYSE:AA), and The Mosaic Company (NYSE:MOS).

10. Rio Tinto Group (NYSE:RIO)

Number of Hedge Fund Holders: 26

Rio Tinto Group (NYSE:RIO) is a leading mining and mineral resources processing company with operations worldwide. On July 27, the company released earnings for the first half of 2022. The company reported earnings per share of $5.327 and generated a revenue of $29.78 billion for the six months that ended on June 30.

Shortly after the company’s earnings release, UBS analyst Myles Allsop revised his price target on Rio Tinto Group (NYSE:RIO) to 4,300 GBP from 4,400 GBP and maintained a Neutral rating on the shares. On July 28, JPMorgan analyst Lyndon Fagan raised his price target on Rio Tinto Group (NYSE:RIO) to 5,350 GBP from 5,300 GBP and reiterated a Neutral rating on the shares.

As of August 16, Rio Tinto Group (NYSE:RIO) has a trailing twelve-month PE ratio of 5.39 and is offering a forward dividend yield of 11.36%, which the company backs with free cash flows of $14.96 billion.

At the end of Q1 2022, 26 hedge funds held stakes in Rio Tinto Group (NYSE:RIO) worth $2.54 billion. This is compared to 22 hedge funds in Q4 2021 with stakes worth $1.83 billion. The hedge fund sentiment for the stock is positive.

In the second quarter of 2022, Fisher Asset Management raised its stakes in Rio Tinto Group (NYSE:RIO) by 6%, bringing them to $905.65 million. The investment covers 0.64% of Ken Fisher’s 13F portfolio.

9. Vale S.A. (NYSE:VALE)

Number of Hedge Fund Holders: 27

Vale S.A. (NYSE:VALE) is one of the largest producers of iron ore and iron ore pellets that are used as raw materials in steelmaking. On June 29, Deutsche Bank analyst Liam Fitzpatrick revised his price target on Vale S.A. (NYSE:VALE) to $20 from $22 and reiterated a Hold rating on the shares.

On July 28, Vale S.A. (NYSE:VALE) reported earnings for the fiscal second quarter of 2022. The company reported earnings per share of $0.94 and beat EPS estimates by $0.14. The company’s revenue for the quarter amounted to $11.16 billion. The company reported that its iron ore production for the second quarter of 2022 grew by 17% quarter on quarter and came in at $74.1 megatonnes.

As of August 16, Vale S.A. (NYSE:VALE) has a trailing twelve-month PE ratio of 3.40 and is offering a forward dividend yield of 10.53%, which the company supports with free cash flows of $11.72 billion.

At the close of Q1 2022, 27 hedge funds were bullish on Vale S.A. (NYSE:VALE) with stakes worth $2.37 billion. This is compared to 25 hedge funds in Q4 2021 with stakes worth $1.71 billion. The hedge fund sentiment for the stock is positive.

As of June 30, Fisher Asset Management owns over 22.18 million shares of Vale S.A. (NYSE:VALE) and is the largest shareholder in the company. The investment covers 0.22% of Ken Fisher’s 13F portfolio.

Here is what asset management firm, Grantham Mayo Van Otterloo & Co. LLC, had to say about Vale S.A. (NYSE:VALE) in its first-quarter 2022 investor letter:

“Let’s look at Vale (NYSE:VALE), the world’s largest iron ore producer, as a case study for how shareholders can be rewarded. Vale’s stock price is about where it was at the beginning of last year. Despite the market’s lack of enthusiasm, the company generated about $20 billion of free cash flow last year. Not bad for a company with a market cap of a little over $100 billion and no substantive debt as of the end of March. ⁴ What did the company do with all that cash? Last year, Vale paid out about $9 billion in regularly scheduled dividends and distributed another $10 billion between extra dividends and share repurchases. Combined with dividends distributed in the first quarter of this year and a recently announced share repurchase, Vale has returned or announced the return of over $33 billion since the beginning of last year, almost a 32% yield relative to the market cap of the company. Not a bad way to win.”

8. Eagle Materials Inc. (NYSE:EXP)

Number of Hedge Fund Holders: 28

Eagle Materials Inc. (NYSE:EXP) produces and supplies heavy construction materials and light building materials in the United States. The company operates through Cement, Concrete & Aggregates, Gypsum Wallboard, and Recycled Paperboard segments. As of August 16, Eagle Materials Inc. (NYSE:EXP) is trading at a PE ratio of 13.71 and is offering a forward dividend yield of 0.74%, which the company supports with free cash flows of $453.75 million.

On July 26, Raymond James analyst Joshua Wilson revised his price target on Eagle Materials Inc. (NYSE:EXP) to $145 from $175 and reiterated an Outperform rating on the shares.

On July 28, Eagle Materials Inc. (NYSE:EXP) announced earnings for the fiscal first quarter of 2023. The company reported earnings per share of $2.82 and beat estimates by $0.02. The company’s revenue for the quarter amounted to $561.39 million, up 18% year over year, and outperformed Market Consensus by $6.53 million.

On August 9, Eagle Materials Inc. (NYSE:EXP) announced that its board of directors has declared a quarterly cash dividend of $0.25 per share of the company’s common stock. The dividend is payable on October 14 to investors of record on September 16.

At the end of Q1 2022, 28 hedge funds disclosed ownership of stakes in Eagle Materials Inc. (NYSE:EXP). The total value of these stakes amounted to $130.07 million, up from $108.22 million in the previous quarter when 26 hedge funds held stakes in the company. The hedge fund sentiment for the stock is positive.

In the second quarter of 2022, Citadel Investment Group raised its stakes in Eagle Materials Inc. (NYSE:EXP) by 152%, bringing them to $20.21 million. As of June 30, Citadel Investment Group owns 0.18 million shares of Eagle Materials Inc. (NYSE:EXP) and is the largest shareholder in the company.

7. LyondellBasell Industries N.V. (NYSE:LYB)

Number of Hedge Fund Holders: 32

LyondellBasell Industries N.V. (NYSE:LYB) is a leading global chemical company and the largest licensor of polyethylene and polypropylene technologies. On July 29, the company announced earnings for the fiscal second quarter of 2022. LyondellBasell Industries N.V. (NYSE:LYB) reported earnings per share of $5.19 and beat EPS estimates by $0.49. The company’s revenue for the quarter amounted to $14.84 billion, up 28.35% year over year, and was ahead of Wall Street consensus by $1.14 billion.

As of August 16, LyondellBasell Industries N.V. (NYSE:LYB) is trading at a PE ratio of 5.53 and is offering a forward dividend yield of 5.16%, which the company supports with free cash flows of $6.15 billion.

On August 2, Barclays analyst Michael Leithead revised his price target on LyondellBasell Industries N.V. (NYSE:LYB) to $102 from $110 and reiterated a buy-side Overweight rating on the shares.

In the second quarter of 2022, Eagle Capital Management raised its stakes in LyondellBasell Industries N.V. (NYSE:LYB) by 39% and brought them to $358 million. The investment covers 1.55% of Boykin Curry’s 13F portfolio.

At the end of the first quarter of 2022, 32 hedge funds held stakes in LyondellBasell Industries N.V. (NYSE:LYB). The total value of these stakes amounted to $744.07 million. This is compared to 35 hedge funds in Q4 2021 with stakes worth $778.62 million.

In addition to LyondellBasell Industries N.V. (NYSE:LYB), Freeport-McMoRan Inc. (NYSE:FCX), Alcoa Corporation (NYSE:AA), and The Mosaic Company (NYSE:MOS) are also offering stable dividend yields which they can support with ample free cash flows.

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

Number of Hedge Fund Holders: 35

Martin Marietta Materials, Inc. (NYSE:MLM) is a natural resource-based building materials company that supplies aggregates and heavy-side building materials to the construction industry in the United States and internationally. On July 14, Wolfe Research analyst Timna Tanners upgraded Martin Marietta Materials, Inc. (NYSE:MLM) to Outperform from Peer Perform and revised her price target on the stock to $384 from $406.

On July 28, Martin Marietta Materials, Inc. (NYSE:MLM) reported earnings for the fiscal second quarter of 2022. The company reported earnings per share of $3.96 and beat estimates by $0.20. The company’s revenue for the quarter amounted to $1.64 billion, up 19.15% year over year, and outperformed Wall Street consensus by $63.28 million.

On August 10, Martin Marietta Materials, Inc. (NYSE:MLM) declared a quarterly cash dividend of $0.66 per share, up 8.2% from its prior dividend of $0.61 per share. The dividend is payable on September 30 to investors of record at the close of business on September 1. As of August 16, the stock has a forward dividend yield of 0.71% which the company supports with free cash flows of $551.90 million.

At the end of Q1 2022, 35 hedge funds were long Martin Marietta Materials, Inc. (NYSE:MLM) with stakes worth $2.71 billion. This is compared to 39 positions in the previous quarter with stakes worth $2.64 billion.

In the second quarter of 2022, Select Equity Group raised its stakes in Martin Marietta Materials, Inc. (NYSE:MLM) by 5%, bringing them to $1.19 billion. As of June 30, Select Equity Group owns roughly 4 million shares of the company and is the largest shareholder.

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