The prices of basic industrial materials have been rising this year, backed by high demand from industrial and residential activities and proposed government infrastructure spending. Amid a volatile market and fluctuating Treasury yields, we think high-yield basic materials stocks Rio Tinto (NYSE:RIO), Fortescue Metals (FSUGY), and Sibanye-Stillwater (SBSW) could be ideal for one’s portfolio. So, let’s take a closer look.The resumption of industrial operations in the second half of 2020 marked the onset of an increase in demand for basic materials. With commodity prices rising substantially, investors are engaging in indirect commodity trades to profit from the flourishing markets. This is evidenced by ProShares Ultra Basic Materials ETF’s (UYM) 170.5% returns over the past year compared to S&P 500 Trust ETF’s (SPY) 47.9% gains over the period.
With the reopening of manufacturing and industrial operations, the demand for basic materials is expected to continue rising in the near term. Also, the White House’s proposed American infrastructure plan is likely to raise commodity prices further, owing to global supply constraints. In addition to these positives, because many basic materials companies pay substantial dividends, this industry offers solid investment opportunities amid troublesome market volatility and fluctuating Treasury yields.
We think high-yield basic materials stocks Rio Tinto Group (RIO), Fortescue Metals Group Limited (OTC:FSUGY), and Sibanye-Stillwater Ltd. (SBSW) are ideal investment bets now.