With the Senate finally voting to approve a $1 trillion bipartisan infrastructure bill on Tuesday, investors are continuing to see money rotate into some of the sectors of the market that stand to benefit the most. The legislation includes roughly $550 billion in new funding for transportation, broadband internet, and utilities and could be a nice catalyst for certain stocks. The materials sector, in particular, is intriguing given that it includes many of the companies poised to play a big role in repairing the infrastructure of the United States.
Materials stocks generally don’t attract as much attention from investors as other areas of the market, but that doesn’t mean they don’t belong in your portfolio. This is particularly true when you consider the large amount of government spending that will take place over the next few years. All of this adds up to opportunity in the materials sector, which is why we've put together a brief overview of the top 3 materials stocks to buy now. Let's take a deeper look below.
1. Nucor
Steel stocks are a great place to look for upside opportunities at this time since these companies are going to play such a big part in repairing America’s crumbling infrastructure, and Nucor (NYSE:NUE) is perhaps the most quality name in the industry. It’s a U.S.-based manufacturer of steel and steel products with a strong balance sheet and a dividend that has grown for 48 consecutive years, which is a testament to this company's consistency. Nucor is seeing huge demand from almost all of its major end markets at this time and the stock continues to hit new highs, both great reasons to consider adding shares.
Nucor recently reported record Q2 numbers that included consolidated net earnings of $5.04 per diluted share, up 62% year-over-year. The company also saw its Q2 consolidated net sales increase by 25% to $8.79 billion. Nucor’s management team expects another record quarter of earnings in Q3 thanks to improved pricing and margins in the steel mills segment of the business, and the company should also benefit from the Biden Administration’s focus on environmental sustainability given Nucor’s position as one of North America’s biggest metal recyclers.
2. Freeport-McMoRan
Next up is Freeport-McMoran (NYSE:FCX), a best-in-breed mining company that is one of the world’s largest publicly traded copper producers. The company also has interests in gold and molybdenum, but investors should be most attracted to Freeport’s portfolio of copper-producing assets which includes the Grasberg minerals district in Indonesia, which is one of the world’s largest copper and gold deposits. Copper is a material that is seeing heavy demand as industrial and construction activity picks up again after the pandemic, which translates to strong sales for this company.
Copper is used in end markets like construction, electrical applications, consumer products, transportation, and industrial machinery, so the recent infrastructure bill could end up being a huge positive for Freeport going forward. There’s also the fact that electric vehicles tend to use more than double the copper of an internal combustion engine automobile, which means Freeport also has ties to the EV sector. The stock recently reclaimed all of the major short-term moving averages and could be gearing up for a move back to 52-week highs, which is another strong reason why it's one of the top materials stocks to buy now.
3. The Mosaic Company
While Mosaic (NYSE:MOS) isn’t necessarily going to benefit from the infrastructure bill as much as the other materials names on this list, it’s still a fantastic option to consider in the sector. As the world’s largest combined producer and marketer of concentrated phosphate and potash crop nutrients, The Mosaic Company plays a huge role in keeping the world’s crops healthy. These are two of the three most important nutrients in agriculture and farmers around the world rely on this company’s products to maximize their yields.
The Mosaic Company just delivered very solid Q2 earnings numbers that included revenues of $2.8 billion, up 37% year-over-year. Q2 gross margins were also up 193% year-over-year thanks to price increases, which should be considered a huge positive for the company going forward. The stock is acting well following the earnings release and has reclaimed the major moving averages, which tells us that it could be in for more upside going forward. If you only own one agriculture stock, The Mosaic Company is a fine choice thanks to its critical role in maintaining the world’s food supply.