The materials sector is highly volatile and subject to geopolitical dynamics amid changing commodity prices, trade wars, supply chain uncertainty, and other factors. But the sector is directly linked with economic activity, and barring a few catastrophic possibilities, the overall economic activity around the world is expected to increase. The materials sector is so diverse that dampening activity in one part of the sector could be easily offset by robust growth in another. The materials sector includes chemical companies, metal companies (including gold and copper miners and steelmakers), construction materials companies and wood-based goods producers.
Perhaps the biggest growth driver of the materials sector is the EV sector. The EV industry is a heavy user of materials such as lithium, manganese, cobalt, graphite, steel, and nickel. The EV industry is seeing exponential growth. In 2020, just 9% of the total cars sold in the world were electric. In 2022 that figure jumped to 14%. The International Energy Agency estimates that about 2.3 million electric cars were sold in the first quarter of 2023 alone. This was a 25% jump from the same period last year. By the end of 2023 the agency expects a whopping 14 million in EV sales, which would be a 35% jump when compared to the previous year.
The IEA report also said that global spending on EVs crossed $425 billion last year, which was a 50% increase from 2021. The important thing to note here is that just 10% of this spending came from government support, while the rest came from consumers.
Our Methodology
For this article, we scanned Insider Monkey’s proprietary database of 910 hedge funds updated as of the end of the second quarter of 2023 and picked 14 basic materials stocks with the highest number of hedge fund investors. These are the best basic materials stocks to buy now according to smart money investors.
Photo by Shane Cottle on Unsplash
Best Basic Materials Stocks To Buy Now
14. Agnico Eagle Mines Limited (NYSE:AEM)
Number of Hedge Fund Holders: 42
Agnico Eagle Mines Limited (NYSE:AEM) ranks 14th in our list of the best basic materials stocks to buy now. The Canadian gold mining company in July posted second quarter results.
Adjusted EPS in the period came in at $0.65 beating estimates by $0.09. Revenue in the quarter jumped 8.9% year over year to $1.72 billion, beating estimates by $20 million.
Insider Monkey’s database of 910 hedge funds shows that 42 hedge funds were long Agnico Eagle Mines Limited (NYSE:AEM) as of the end of the June quarter. The most significant stakeholder of Agnico Eagle Mines Limited (NYSE:AEM) was Jean-Marie Eveillard’s First Eagle Investment Management which owns a $313 million stake in the company.
13. Air Products & Chemicals, Inc. (NYSE:APD)
Number of Hedge Fund Holders: 43
Air Products & Chemicals, Inc. (NYSE:APD) shares have gained about 20% over the past one year. Air Products & Chemicals, Inc. (NYSE:APD) has upped its dividends consistently for over four decades now.
A total of 43 hedge funds in Insider Monkey’s database of hedge funds were long Air Products & Chemicals, Inc. (NYSE:APD) as of the end of the June quarter.
12. International Flavors & Fragrances Inc. (NYSE:IFF)
Number of Hedge Fund Holders: 46
International Flavors & Fragrances Inc. (NYSE:IFF) ranks 12th in our list of the best basic materials stocks to buy now.
As of the end of the second quarter of 2023, 46 hedge funds in Insider Monkey’s database of hedge funds reported owning stakes in International Flavors & Fragrances Inc. (NYSE:IFF). The biggest hedge fund stakeholder of International Flavors & Fragrances Inc. (NYSE:IFF) was Scott Ferguson’s Sachem Head Capital which owns a $530 million stake in the company.
11. Corteva, Inc. (NYSE:CTVA)
Number of Hedge Fund Holders: 46
Corteva, Inc. (NYSE:CTVA) is down about 13% over the past one year. Earlier this month, UBS upgraded Corteva, Inc. (NYSE:CTVA) to Buy from Neutral. The firm believes Corteva, Inc. (NYSE:CTVA) is undervalued when compared to its earnings potential.
“The market is now too negative on Corteva, Inc. (NYSE:CTVA) ability to grow earnings into a softening ag environment. Corteva (CTVA) laid the groundwork on its cost savings and margin-improvement plan years ago, and is now reaping the benefit of that work,” UBS analyst Joshua Spector said.
A total of 46 hedge funds out of the 910 funds tracked by Insider Monkey were long Corteva, Inc. (NYSE:CTVA). The biggest stakeholder of Corteva, Inc. (NYSE:CTVA) during this period was Ken Griffin’s Citadel Investment Group which owns a $323 million stake in the company.
A total of 46 hedge funds out of the 910 funds tracked by Insider Monkey held stakes in Corteva, Inc. (NYSE:CTVA). The biggest hedge fund stakeholder of Corteva, Inc. (NYSE:CTVA) during this period was Ken Griffin’s Citadel Investment Group which owns a $323.2 million stake in the company.
10. Martin Marietta Materials, Inc. (NYSE:MLM)
Number of Hedge Fund Holders: 47
Aggregates and building materials company Martin Marietta Materials, Inc. (NYSE:MLM) ranks 10th in our list of the best basic materials stocks to buy now.
As of the end of the second quarter of 2023, 47 hedge funds out of the 910 hedge funds tracked by Insider Monkey reported owning stakes in Martin Marietta Materials, Inc. (NYSE:MLM). The biggest stakeholder of Martin Marietta Materials, Inc. (NYSE:MLM) was Robert Joseph Caruso’s Select Equity Group which owns a $1.3 billion stake in the company.
ClearBridge Large Cap Value Strategy made the following comment about Martin Marietta Materials, Inc. (NYSE:MLM) in its Q2 2023 investor letter:
“The Strategy outperformed in the quarter, benefiting from recent opportunistic additions such as Meta Platforms as well as medium and long-term holdings such as Vertiv, Oracle and Martin Marietta Materials, Inc. (NYSE:MLM).
Our selection in the materials sector also helped portfolio outperformance, with Martin Marietta Materials, a leading producer of aggregates for construction, helping the portfolio manage inflation risk. While the benefits from robust pricing in aggregates and cement have lately been muted by inflation, aggregates gross margins should inflect meaningfully higher going forward as incremental pricing and lower energy costs flow through the company’s income statement.”
9. PPG Industries, Inc. (NYSE:PPG)
Number of Hedge Fund Holders: 48
Paints, coatings and specialty materials company PPG Industries, Inc. (NYSE:PPG) ranks 9th in our list of the best basic materials stocks to buy now. As of the end of the second quarter of 2023, 48 hedge funds in Insider Monkey’s database of 910 hedge funds were long PPG Industries, Inc. (NYSE:PPG). The most significant stakeholder of PPG Industries, Inc. (NYSE:PPG) was Ken Griffin’s Citadel Investment Group which owns a $268 million stake in the company.
In July this year PPG Industries, Inc. (NYSE:PPG) upped its quarterly dividend by 4.8%.
PPG Industries, Inc. (NYSE:PPG)’s management gave some important updates during its second quarter earnings call:
“Moving to our outlook. We expect global industrial production to remain at lower levels in the third quarter, including similar demand activity in Europe, some further slowing in the US and modest sequential improvement in China. We do expect certain pockets of industry activity to remain more resilient, including aerospace and automotive industries, where we are well positioned on a global basis. In addition, we expect economic activity in Mexico to remain solid. In our architectural businesses, we expect demand conditions to be mixed by geography. In Europe, we anticipate demand will stabilize at current levels, resulting in year-over-year sales volume being much closer to the prior year. In the US, we anticipate DIY demand to remain at lower levels and pro-contractor residential repaint activity to begin to modestly decline sequentially with the backdrop of lower existing home sales.
Finally, in Mexico, we expect our PPG Comex business to continue to post solid organic growth. In the third quarter, we expect to realize additional benefits from moderating cost inputs. At the peak of our supply disruptions, we had more than 160 force majeures in our global supply chain. That is now about 10, which is in line with our historical norms. To date, we have not yet recognized the full financial benefit of our commodity supply chain normalizing. From a financial realization perspective, through the end of June, our input costs were …”[read the complete earnings call transcript here].
ClearBridge Large Cap Value Strategy made the following comment about PPG Industries, Inc. (NYSE:PPG) in its Q2 2023 investor letter:
“We were fairly active in the quarter as market dislocations allowed us to be opportunistic, while focusing on companies with stronger moats, better pricing power, more predictable long-term growth and higher returns. In the materials sector we exited PPG Industries, Inc. (NYSE:PPG) and initiated a position in Sherwin-Williams. While both companies operate in the paint and coating industry and are benefiting from improving margins as raw material prices have come down of late, we believe Sherwin-Williams’ dominant retail footprint affords it better pricing power through the cycle. The company provided conservative 2023 guidance and has been successfully gaining market share in the pro segment. While PPG has more European and industrial exposure, Sherwin-Williams’ residential and more domestic focus should also benefit the company as housing indicators appear to be troughing. Weak housing in the face of higher mortgage rates caused Sherwin-Williams stock to sell off in the first quarter, creating a compelling investment opportunity for long-term focused fundamental investors.”
8. Newmont Corporation (NYSE:NEM)
Number of Hedge Fund Holders: 49
Gold mining company Newmont Corporation (NYSE:NEM) shares are down about 17% year to date. Newmont Corporation (NYSE:NEM) recently received approval from Australia’s Foreign Investment Review Board to proceed with its proposed A$26.2 billion takeover of Australia’s Newcrest Mining.
Out of the 910 hedge funds tracked by Insider Monkey, 49 funds had stakes in Newmont Corporation (NYSE:NEM). The most significant stakeholder of the company was Jean-Marie Eveillard’s First Eagle Investment Management which owns a $787 million stake in Newmont Corporation (NYSE:NEM).
Newmont Corporation (NYSE:NEM) management talked about the company’s dividend policy and other matters during the second quarter earnings call:
“During the second quarter, we declared a dividend of $0.40 per share or $1.60 per share on an annualized basis, consistent with the last two quarters and calibrated within our 2023 dividend payout range of $1.40 to $1.80 per share.
We have now maintained a dividend yield above 3% for 11 consecutive quarters, and this continues to be the highest dividend per share in the gold sector.”
Read the full transcript of the call here.
7. Vulcan Materials Company (NYSE:VMC)
Number of Hedge Fund Holders: 49
Vulcan Materials Company (NYSE:VMC) shares have gained about 26% over the past one year.
Out of the 910 hedge funds tracked by Insider Monkey, 49 hedge funds were long Vulcan Materials Company (NYSE:VMC). The most significant stakeholder of Vulcan Materials Company (NYSE:VMC) during this period was Sharlyn C. Heslam’s Stockbridge Partners which owns a $462 million stake in the company.
In August, Vulcan Materials Company (NYSE:VMC) posted second quarter results. Adjusted EPS in the period came in at $2.29 beating estimates by $0.37. Revenue in the quarter jumped 8.2% year over year to $2.11 billion, beating estimates by $60 million.
Weitz Large Cap Equity Fund made the following comment about Vulcan Materials Company (NYSE:VMC) in its second quarter 2023 investor letter:
“Back in the “old” economy, rocks-and-gravel producer Vulcan Materials Company (NYSE:VMC) saw its stock rise more than 30% during the quarter. The aggregates pricing power story has been on full display, private sector volumes have remained healthy, and we expect public infrastructure spending to power robust, multi-year tailwinds.”
6. Axalta Coating Systems Ltd (NYSE:AXTA)
Number of Hedge Fund Holders: 49
Ranking 6th in our list of the best basic materials stocks to buy now is Axalta Coating Systems Ltd (NYSE:AXTA). Axalta Coating Systems Ltd (NYSE:AXTA) is up about 14% over the past one year. Axalta Coating Systems Ltd (NYSE:AXTA) missed earnings and revenue estimates for the second quarter.
Insider Monkey’s database of hedge funds shows that 49 hedge funds reported owning stakes in Axalta Coating Systems Ltd (NYSE:AXTA) as of the end of the June quarter. The biggest hedge fund stakeholder of Axalta Coating Systems Ltd (NYSE:AXTA) was John W. Rogers’ Ariel Investments which owns a $185 million stake in the company.
Ariel Appreciation Fund made the following comment about Axalta Coating Systems Ltd. (NYSE:AXTA) in its Q1 2023 investor letter:
“Additionally, leading manufacturer and distributor of coatings technologies Axalta Coating Systems Ltd. (NYSE:AXTA) advanced on a bottom-line earnings beat, as strong pricing across end markets more than offset currency headwinds. In our view, risks to auto production driven by ongoing supply chain challenges and input cost inflation should begin to subside in 2023. We also believe continued pricing momentum will help margins recover to pre-pandemic levels, and expect vehicle production and corresponding demand for mobility coatings to gradually improve as supply chain constraints ease. Longer-term, we expect the company to continue to gain market share from ongoing consolidation in its refinishing business and further improve its margin profile through cost savings programs.”
5. Ecolab Inc. (NYSE:ECL)
Number of Hedge Fund Holders: 56
Ecolab Inc. (NYSE:ECL) ranks 5th in our list of the best basic materials stocks to buy now.
A total of 56 hedge funds out of the 910 funds tracked by Insider Monkey reported owning stakes in Ecolab Inc. (NYSE:ECL).
Ecolab Inc. (NYSE:ECL)’s second quarter EPS came in at $1.24 beating estimates by $0.03. Revenue in the quarter jumped 7.6% year over year to $3.9 billion, surpassing estimates by $40 million. Ecolab Inc. (NYSE:ECL)’s organic sales jumped 9% when compared to the previous year.
Madison Sustainable Equity Fund made the following comment about Ecolab Inc. (NYSE:ECL) in its second quarter 2023 investor letter:
“Ecolab Inc. (NYSE:ECL) is benefiting from price increases put in place last year to offset inflationary pressures. The price increases more than offset flattish volumes and are modestly ahead of raw material inflation resulting in a return to earnings growth. We believe that Ecolab’s profitability will improve going forward from market share gains and its fast-growing bioprocessing business.”
