These Materials Stocks Can Protect Investors From Inflation
Exploring areas of the market that don’t get a lot of attention from the majority of investors can be a rewarding strategy, especially if you can pick up on a sector that is showing relative strength. For example, stocks in the Materials sector have been standing out as outperformers over recent weeks and could continue trending higher going forward, yet many of these companies are still flying under the radar. Since these businesses produce raw materials like plastics, fertilizers, concrete, and metals, their products are cyclical and could benefit from a strong economy in the coming months.
What’s also interesting about materials stocks at the moment is that they can potentially help investors protect their portfolios from inflation, since commodity prices like steel and copper are steadily rising and should lead to more profits for companies that produce these metals. If you are interested in adding some of the best options in the sector, keep reading below for an overview of the top 3 materials stocks to buy in November.
1. Olin Corporation
This vertically integrated chemicals company is breaking out to new all-time highs following a very strong earnings report, making it one of the top names in the sector to watch during the month of November.
Olin Corporation (NYSE:OLN) has three segments, including Chlor Alkali Products & Vinyls, Epoxy, and Winchester. Chlor Alkali is an industrial process used to produce chlorine, a chemical that plays a key role in creating household cleaning products and in water purification. Epoxy materials are used in a variety of different applications, like electrical laminates, wind energy, consumer goods and composites, and more.
It’s worth mentioning that Olin is a leading U.S. manufacturer of ammunition with its Winchester segment, which is a product seeing heavy demand following a tumultuous 2020 for the country.
Olin reported a record adjusted EBITDA of $707 million in Q3 and saw all three of its business segments post strong year-over-year sales jumps. Chlor Alkali Products and Vinyls Sales jumped by 40.7% year-over-year to reach $1.06 billion, Epoxy sales increased by 84.3% to $877.7 million, and Winchester sales nearly doubled to reach $400 million.
With such strong growth across all areas of the business and a strong post-earnings reaction for the stock, it's clear that Olin Corp is a worthy pick in the materials sector at this time.
2. Freeport-McMoRan
Next up is Freeport-McMoRan, a metals & mining company that offers exposure to copper, gold, and molybdenum. Copper prices have been rallying thanks to low global supply, which is a trend that could continue in the near term and benefit this company’s share price.
Freeport-McMoran Copper & Gold (NYSE:FCX)’s assets include the Grasberg minerals district in Indonesia, which is one of the world’s largest copper and gold deposits, along with several large-scale mining operations in North and South America. Copper demand tends to move in tandem with world economic growth, another plus for this company as the economic impacts of the pandemic wane.
It’s also worth mentioning that Freeport McMoRan recently reported strong Q3 earnings including revenue growth of 58% year-over-year to $6.083 billion. The company also started paying dividends again in May, another strong reason that supports adding shares. Finally, investors should note that copper is a very important raw material used for manufacturing electric vehicles, which means that this stock could be an indirect play on the growth of that sector.
3. Nucor
Thanks to its high tensile strength and relatively affordable cost, steel is essentially the world’s most important engineering and construction material. It’s used in buildings, infrastructure, auto manufacturing, electrical appliances, and more, which means a company like Nucor is seeing strong demand in almost all end markets at this time. That’s a big reason why this stock is a top materials name in November, especially since the company just reported another quarter of record earnings.
North Carolina-based Nucor (NYSE:NUE) is a major manufacturer of steel and steel products and is also North America’s largest steel recycler, so this stock offers a great way to play the rising prices in this important commodity. Although the company missed its Q3 EPS estimates, investors should still be impressed that Nucor increased its Q3 diluted EPS by over 1000% year-over-year.
The stock has pulled back quite a bit from its all-time highs, which means it's a great buy-the-dip candidate to consider in the sector. Nucor also recently reclaimed the 50-day moving average, which might be a signal that buyers are stepping back in to add exposure.