15 Best Materials Stocks To Invest In

Published on December 6, 2023 at 10:35 am by Sheryar Siddiq in Hedge Funds, News

In this article, we will take a look at the 15 best materials stocks to invest in. To see more such companies, go directly to 5 Best Materials Stocks to Invest In.

The year 2024 is poised to reveal the enduring consequences of substantial government expenditures and tax incentives aimed at bolstering manufacturing and infrastructure, as seen through initiatives such as the IRA, the CHIPS Act, and the IIJA. This injection of capital is underway amidst a challenging labor market, fluctuating energy prices, and persistent endeavors to curtail carbon emissions in both the energy and industrial domains. The U.S. manufacturing industry, constituting a substantial segment of the overall U.S. materials sector, leveraged the momentum generated by the aforementioned pieces of legislation. This resulted in a nearly twofold increase in investments for semiconductor and clean technology manufacturing compared to the commitments made in 2021, and an allocation nearly 20 times greater than the amount designated in 2019. As of July 2023, annual construction spending in manufacturing, as reported by Deloitte, stands at $201 billion. This marks a substantial 70% year-over-year increase, laying the groundwork for continued industry growth in 2024.

In addition, technological innovations seem to be driving the manufacturing and materials industry. Builders and engineers are now embracing 4D and 5D simulations to address challenges in workflow arising from labor shortages and scheduling issues. Moreover, the materials industry’s progression towards Industry 4.0 and the realization of a “smart factory” appears to be well underway. The smart factory incorporates cutting-edge technologies such as AI, 5G, Internet of Things (IoT), data analytics, and cloud computing into the production environment, offering real-time insights, end-to-end visibility, and scalable solutions. The potential advantages of smart factories are extensive, encompassing improvements in asset efficiency, labor productivity, and product quality, leading to substantial cost reductions.
According to a study by Deloitte, an impressive 86% of surveyed manufacturing executives anticipate that smart factory solutions will be the key drivers of competitiveness in the coming five years.

The materials industry includes companies involved in the creation of products utilized in the construction and manufacturing sectors. This encompasses the production of chemicals, glass, cement, and metals, all of which find applications in construction activities. Despite the substantial size of the manufacturing and materials industry, notable players such as Freeport-McMoRan Inc. (NYSE:FCX), Teck Resources Ltd (USA) (NYSE:TECK), and The Sherwin-Williams Company (NYSE:SHW) stand out as key contributors in this sector.

Photo by Robby McCullough on Unsplash

Our Methodology

We have shortlisted the 10 best materials stocks using Insider Monkey’s database of 910 hedge funds. The companies selected have substantial exposure to the manufacturing and materials industries through various business operations. The following stocks have been listed in ascending order of the number of hedge funds holding a stake in them as of Q3 2023.

15. Southern Copper Corporation (NYSE:SCCO)

Number of Hedge Fund Holders: 18

Established in 1952, Southern Copper Corporation is a mining company involved in the production of copper, molybdenum, silver, and zinc. Its operations encompass mining units and metallurgical facilities located in Mexico and Peru. The present form of Southern Copper can be linked to the 2005 acquisition of Southern Peru Copper Corporation by the Mexican copper producer Minera México.

In the most recent quarter, Southern Copper Corporation (NYSE:SCCO) announced the construction of a new concentrator plant at the Buenavista Zinc – Sonora project, situated within the Buenavista deposit. This facility boasts a production capacity of 100,000 tonnes of zinc and 20,000 tonnes of copper annually. Upon commencement of operations, the concentrator is expected to effectively double the company’s zinc production capacity and generate over 2,000 job opportunities on the operational front.

Additionally, in the fiscal third quarter ending on September 30, 2023, Southern Copper Corporation (NYSE:SCCO) witnessed a 16.2% year-over-year growth in net sales, reaching $2.51 billion. The net income attributable to SCCO amounted to $622 million, reflecting a 19.4% increase compared to the same quarter the previous year. Furthermore, the net earnings per common share attributable to SCCO rose by 19.4% year-over-year, reaching $0.80.

As of the end of the third quarter of 2023, 18 hedge funds out of the 910 funds tracked by Insider Monkey were long Southern Copper Corporation (NYSE:SCCO). The biggest stakeholder of Southern Copper Corporation (NYSE:SCCO) during this period was Ken Fisher’s Fisher Asset Management which owns a $249.2 million stake in the company.

In addition to Freeport-McMoRan Inc. (NYSE:FCX), Teck Resources Ltd (USA) (NYSE:TECK), and The Sherwin-Williams Company (NYSE:SHW), Southern Copper Corporation (NYSE:SCCO) ranks as one of the best materials stocks to buy.

14. ArcelorMittal S.A. (NYSE:MT)

Number of Hedge Fund Holders: 19

ArcelorMittal S.A. (NYSE:MT) is a multinational steel manufacturing corporation based in Luxembourg, with its headquarters located in Luxembourg City. The company was established in 2006 through the acquisition and merger of Arcelor by the Indian-owned Mittal Steel.

Jefferies assigned ArcelorMittal S.A. (NYSE:MT) a Buy rating and a €33 price target on December 4, citing an “appealing value recovery.” The acknowledgment of the well-known challenges in the 2024 macro and steel demand environment, coupled with ongoing capacity idling, is already factored into expectations and valuations. Overall, steel spreads are reaching a bottom, and ArcelorMittal S.A. (NYSE:MT) is seen as the best-positioned to capitalize on a steel price rebound in H1 2024 as traders replenish their inventories. Analyst Chris LaFemina from Jefferies noted that while cost spreads in the U.S. are recovering, they seem to be approaching their lowest point in Q4 and into the next year’s Q1.

As per Insider Monkey’s proprietary database, 19 hedge funds were bullish on ArcelorMittal S.A. (NYSE:MT), as of the end of the third quarter. John Overdeck and David Siegel’s Two Sigma Advisors was the biggest stakeholder in the company’s stock at the end of Q3 2023.

13. BHP Group Limited (NYSE:BHP)

Number of Hedge Fund Holders: 25

BHP Group Limited (NYSE: BHP) is a prominent global metals and mining company with a presence in Asia, Oceania, North America, and various other regions. In alignment with the materials industry’s trend towards renewables and environmentally friendly practices, BHP Group Limited (NYSE: BHP) unveiled plans for a new battery energy facility for its Australian mines in November 2023.

Insider Monkey dug through 910 hedge fund holdings for their shareholdings during this year’s September quarter and found that 25 had held a stake in the company. Ken Fisher’s Fisher Asset Management is BHP Group Limited (NYSE:BHP)’s largest investor among these since it owns 19.3 million shares that are worth $1 billion.

12. Rio Tinto Group (NYSE:RIO)

Number of Hedge Fund Holders: 27

Rio Tinto Group (NYSE:RIO) is one of the biggest diversified mining companies in the world. The company is committed to the global exploration, mining, and processing of a wide range of mineral resources. Its portfolio includes a diverse array of minerals, such as lithium, aluminum, copper, iron ore, diamonds, gold, borates, titanium dioxide, salt, silver, and molybdenum.

In October 2023, UBS revised its rating on Rio Tinto Group (NYSE:RIO), upgrading the shares from Sell to Neutral. The note highlighted the potential stabilization of iron ore prices within the range of $100 to $130 per tonne over the next six months. This stability is anticipated to enable Rio Tinto Group (NYSE:RIO) to offer attractive dividends to investors, with UBS estimating a dividend yield of 7% for the stock.

During 2023’s September quarter, out of the 910 hedge funds tracked by Insider Monkey, 27 had bought the firm’s shares. Rio Tinto Group (NYSE:RIO)’s largest hedge fund investor is Ken Fisher’s Fisher Asset Management due to its $990 million stake.

11. Nucor Corporation (NYSE:NUE)

Number of Hedge Fund Holders: 33

Headquartered in Charlotte, North Carolina, Nucor Corporation (NYSE:NUE) specializes in the production of steel and related products. It holds the position of the largest steel producer in the United States and is also recognized as the largest recycler of scrap in North America.

Earlier in November, Nucor Corporation (NYSE:NUE) announced its intentions to allocate $280 million for the expansion of its existing product range and the introduction of a new product line within its steel coil and plate offerings in Tuscaloosa County. This investment, located at the company’s plant on Holt Road, will enhance Nucor’s Tuscaloosa County mill’s capability to produce thinner, stronger, and higher-quality plates, along with a new product line that is not currently manufactured domestically. Construction is slated to commence by the end of the year, and the project is anticipated to be fully operational by the summer of 2027.

As of the close of Q3 2023, 33 hedge funds, compared with 39 in the previous quarter, owned investments in Nucor Corporation (NYSE:NUE), according to Insider Monkey’s database. The collective value of these stakes is over $336.46 million. With over 1.5 million shares, Citadel Investment Group was the company’s leading stakeholder in Q3.

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

Number of Hedge Fund Holders: 34

Based in Rio de Janeiro, Brazil, Vale S.A. (NYSE:VALE), along with its subsidiaries, engages in the production and sale of iron ore and iron ore pellets used as raw materials in steelmaking, both in Brazil and on the international market. The company operates through two segments: Iron Solutions and Energy Transition Materials.

In the third quarter of 2023, Vale S.A. (NYSE:VALE) witnessed a 7% year-over-year increase in net operating revenues, reaching $10.62 billion. The company’s adjusted EBIT from continuing operations demonstrated a 17.5% year-over-year growth, amounting to $3.40 billion. Furthermore, the adjusted EBITDA from continuing operations experienced a 13.9% year-over-year rise, totaling $4.18 billion. Vale S.A. (NYSE:VALE)’s gross profit also marked a notable increase, reaching $4.31 billion, reflecting an 18.9% improvement over the prior-year quarter. Additionally, the net income from continuing operations attributable to VALE amounted to $2.84 billion.

For their shareholders during 2023’s third quarter, 34 out of the 910 hedge funds polled by Insider Monkey had held a stake in the firm. Vale S.A. (NYSE:VALE)’s largest stakeholder among these is Ken Fisher’s Fisher Asset Management since it owns $242.96 million worth of shares.

9. Dow Inc. (NYSE:DOW)

Number of Hedge Fund Holders: 39

Dow Inc. (NYSE:DOW) functions as a holding company for The Dow Chemical Company and its affiliated entities. The company operates through six global businesses, categorized into segments including Packaging & Specialty Plastics, Industrial Intermediates & Infrastructure, and Performance Materials & Coatings.

In October, Dow Inc. (NYSE:DOW) reported its third-quarter results. The adjusted EPS for the quarter exceeded expectations at $0.48, surpassing estimates by $0.03. Despite a 23.9% year-over-year decline, the revenue for the quarter amounted to $10.73 billion, surpassing estimates by $320 million.

As of Q3 2023 end, 39 out of the 910 hedge funds part of Insider Monkey’s database had bought a stake in the company. Dow Inc. (NYSE:DOW)’s largest hedge fund investor is Richard S. Pzena’s Pzena Investment Management due to its $939.9 million stake.

8. Air Products and Chemicals (NYSE:APD)

Number of Hedge Fund Holders: 43

Air Products & Chemicals, Inc. (NYSE:APD), headquartered in Lehigh Valley, Pennsylvania, stands as a prominent industrial gases company, specializing in the supply of essential industrial gases, related equipment, and application expertise across numerous industries. Additionally, the company is involved in the development, engineering, construction, ownership, and operation of some of the largest industrial gas and carbon-capture projects.

Air Products & Chemicals, Inc. (NYSE:APD) recently revealed its plans to construct a carbon capture and carbon dioxide (CO2) treatment facility at its current hydrogen production plant in Rotterdam, the Netherlands. Anticipated to commence operations in 2026, the facility will produce “blue” hydrogen, which will be supplied to ExxonMobil’s Rotterdam refinery and other clients through Air Products’ hydrogen pipeline network. Upon completion, this initiative will transform Air Products’ Rotterdam hydrogen plant into the largest blue hydrogen facility in Europe.

The number of hedge funds tracked by Insider Monkey owning stakes in Air Products and Chemicals, Inc. (NYSE:APD) stood at 43 in Q3 2023, which remained unchanged from the previous quarter. The total value of these stakes is over $952.3 million. With nearly 1 million shares, Citadel Investment Group was the company’s leading stakeholder in Q3.

7. PPG Industries, Inc. (NYSE:PPG)

Number of Hedge Fund Holders: 49

PPG Industries, Inc. (NYSE:PPG) is an American company and a worldwide provider of paints, coatings, and specialty materials. Headquartered in Pittsburgh, Pennsylvania, PPG has a global presence, operating in more than 70 countries around the world.

PPG Industries, Inc. (NYSE:PPG) exceeded Wall Street expectations for third-quarter profit and revised its full-year earnings forecast upward. Strong sales volumes in the automotive and aerospace sectors contributed to increased coatings sales at the company. The company reported a quarterly profit of $2.07 per share, surpassing the average analyst estimate of $1.94 per share. PPG Industries, Inc. (NYSE:PPG) noted a 28% rise in income from industrial coatings, reaching $246 million in the reported quarter compared to the previous year, attributed to higher selling prices and reduced costs.

As of the end of the third quarter of 2023, 49 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 Andreas Halvorsen’s Viking Global which owns a $524.9 million stake in the company.

ClearBridge Investments mentioned PPG Industries, Inc. (NYSE:PPG) in its Q2 2023 investor letter. Here is what the firm has to say:

“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.”

6. Newmont Corporation (NYSE:NEM)

Number of Hedge Fund Holders: 49

Newmont Corporation (NYSE:NEM), headquartered in Greenwood Village, Colorado, is the one of the largest gold mining companies globally. Established in 1921, the corporation owns and operates gold mines situated in various locations, including Nevada, Colorado, Ontario, Quebec, Mexico, the Dominican Republic, Australia, Ghana, Argentina, Peru, and Suriname.

Recently, Newmont Corporation (NYSE:NEM) announced its intentions to generate $2 billion in cash through the sale of mines and divestment of projects subsequent to the acquisition of Australia’s Newcrest Mining. The completion of the approximately $15 billion deal on November 6 elevates the company’s value to approximately $50 billion and incorporates five active mines and two advanced projects into Newmont’s portfolio.

For their third quarter of 2023 shareholdings, 49 out of the 910 hedge funds profiled by Insider Monkey had bought Newmont Corporation (NYSE:NEM)’s shares. Out of these, the biggest investor is Jean-Marie Eveillard’s First Eagle Investment Management as it owns 18.28 million shares that are worth $675.48 million.

Similar to Freeport-McMoRan Inc. (NYSE:FCX), Teck Resources Ltd (USA) (NYSE:TECK), and The Sherwin-Williams Company (NYSE:SHW), Newmont Corporation (NYSE:NEM) is one of the best materials stocks to invest in.

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