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Stay Ahead of The Market with These 3 Basic Materials Stocks
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The major indices closed in red territory yesterday for the first time since last Monday, slamming the brakes on last week’s spectacular run. Fear swept the market intraday after the Fed commented on tackling monetary policy more aggressively than previously thought.
Last week’s rally kicked off after investors finally thought they had a clear understanding of the Fed’s plans after months of uncertainty. Understandably so, yesterday’s comments sent investors home scratching their heads again.
Nonetheless, the indices were strong enough close above their intraday lows, and today, the foot is back on the pedal.
It’s too early to gauge if the strength will stay, but in cloudy times like these, it’s beneficial to find companies that have displayed consistent strength year-to-date, such as stocks in the Zacks Basic Materials sector.
The sector has a year-to-date return of nearly 13%, easily outpacing the S&P 500. Let’s look at three stocks in this sector and analyze why I believe they would be good portfolio additions.
Image Source: Zacks Investment Research
VALE
Vale SA (VALE - Free Report) is a mining company that extracts iron, nickel, gold, copper, aluminum, potash, and other precious metals. Year-to-date, the strength of the company’s shares has been incredible, increasing 45% in value while the S&P 500 has declined roughly 6%. Vale has a 5.2X forward earnings multiple, much lower than the Zacks Mining – Iron Industry of 7.4X. Below is YTD performance of the two.
Image Source: Zacks Investment Research
Over the last 60 days, the miner has received nine upwards estimate revisions from analysts, boosting the Zacks Consensus Estimate for next quarter nearly 150% to $0.88 per share and 73% to $1.06 per share for the following quarter. Full-year earnings estimates have increased almost 85% to $3.87 per share for FY22 and 20% to $2.53 per share for FY23.
Image Source: Zacks Investment Research
Vale has had little issue beating EPS estimates, chaining together six beats in a row dating back to October 2020. The four-quarter trailing average EPS surprise is a strong 23.4%, and in its latest quarter, Vale beat EPS estimates by nearly 70%. Additionally, the company’s bottom line is expected to grow by 7% over the next three to five years.
For those looking for a stream of income, Vale’s got that covered with its annual dividend which yields 7.3%, and a payout ratio of 57%. Additionally, the miner has increased its dividend six times over the last five years, providing an annualized five-year dividend growth rate of nearly 82%. Vale is currently a Zacks Rank #1 (Strong Buy) and has an overall VGM Score of an A.
The Mosaic Company
The Mosaic Company (MOS - Free Report) is a world-leading crop nutrition company that focuses on two of the most vital crop nutrients – potash and phosphate. MOS shares have been scorching the S&P 500 year-to-date, providing shareholders with a remarkable 67% return. Additionally, the company’s forward earnings multiple of 5.9X is considerably lower than the Zacks Fertilizer Industry’s 10.1X. Below is YTD performance of the two.
Image Source: Zacks Investment Research
Fourteen analysts have upwardly revised their estimates over the last 60 days, increasing the Zacks Consensus Estimate by 12% for the next quarter and nearly 28% for the following quarter. Full-year EPS estimates for the current year have increased 30%, and for next year, the consensus estimate trend has increased by a stunning 103%.
Image Source: Zacks Investment Research
Mosaic has missed EPS estimates just one time in its last four quarters, with its most recent quarter falling in line with expectations. The average EPS surprise over this time frame has been a positive 3.7%, and the company’s bottom line is expected to increase by 7% over the next three to five years.
MOS also likes to reward its shareholders, distributing an annual dividend with a modest 0.67% yield and payout ratio of 6%. Additionally, the company has increased its dividend four times in the last five years and expects current full-year EPS to grow 125% year-over-year. Mosaic is currently a Zacks Rank #1 with an overall VGM Score of a B.
Allegheny Technologies Incorporated
Allegheny Technologies Incorporated (ATI - Free Report) is a global manufacturer of technically advanced specialty materials and complex components with a focus on jet engines. Similar to VALE and MOS, shares of the company have soared year-to-date, increasing by 70% in value and once again crushing the S&P 500’s performance. Below is YTD performance of the two.
Image Source: Zacks Investment Research
Nine analysts have upwardly revised their estimates over the last 60 days, causing the Zacks Consensus Estimate to skyrocket 90% for the next quarter and 22% for the following quarter. Current and next year estimates have enjoyed notable increases as well, up 45% for FY22 and up 20% for FY23.
Image Source: Zacks Investment Research
Quarterly reports for ATI have been rock-solid dating back to February 2020, managing to string together nine consecutive quarterly EPS beats. Over the previous four earnings reports, the company boasts an average EPS surprise in the triple-digits at 127%, and in the last quarter, ATI surpassed earnings expectations by that exact amount as well – 127%, or $0.14 per share.
Unlike MOS and VALE, Allegheny Technologies does not currently distribute dividends to shareholders. However, this leaves the company with more cash to invest in operations and other vital areas. Additionally, the current full-year earnings of ATI are expected to grow by a jaw-dropping 660% year-to-year. ATI is currently a Zacks Rank #1 and possesses an overall VGM Score of a C.
Bottom Line
To reap the full benefits of the market, investors must be ready to pivot to sectors with strong relative strength as well as other attractive fundamentals in times of uncertainty.
These three companies have recently displayed remarkable relative strength and have provided shareholders with high-percentage returns over the last year while the market has struggled to find its direction.
A high-performing sector, stellar future growth rates, solid earnings reports, and most importantly, a Zacks Rank #1 are all reasons why I believe VALE, MOS, and ATI deserve spots within your portfolio.
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Stay Ahead of The Market with These 3 Basic Materials Stocks
The major indices closed in red territory yesterday for the first time since last Monday, slamming the brakes on last week’s spectacular run. Fear swept the market intraday after the Fed commented on tackling monetary policy more aggressively than previously thought.
Last week’s rally kicked off after investors finally thought they had a clear understanding of the Fed’s plans after months of uncertainty. Understandably so, yesterday’s comments sent investors home scratching their heads again.
Nonetheless, the indices were strong enough close above their intraday lows, and today, the foot is back on the pedal.
It’s too early to gauge if the strength will stay, but in cloudy times like these, it’s beneficial to find companies that have displayed consistent strength year-to-date, such as stocks in the Zacks Basic Materials sector.
The sector has a year-to-date return of nearly 13%, easily outpacing the S&P 500. Let’s look at three stocks in this sector and analyze why I believe they would be good portfolio additions.
Image Source: Zacks Investment Research
VALE
Vale SA (VALE - Free Report) is a mining company that extracts iron, nickel, gold, copper, aluminum, potash, and other precious metals. Year-to-date, the strength of the company’s shares has been incredible, increasing 45% in value while the S&P 500 has declined roughly 6%. Vale has a 5.2X forward earnings multiple, much lower than the Zacks Mining – Iron Industry of 7.4X. Below is YTD performance of the two.
Image Source: Zacks Investment Research
Over the last 60 days, the miner has received nine upwards estimate revisions from analysts, boosting the Zacks Consensus Estimate for next quarter nearly 150% to $0.88 per share and 73% to $1.06 per share for the following quarter. Full-year earnings estimates have increased almost 85% to $3.87 per share for FY22 and 20% to $2.53 per share for FY23.
Image Source: Zacks Investment Research
Vale has had little issue beating EPS estimates, chaining together six beats in a row dating back to October 2020. The four-quarter trailing average EPS surprise is a strong 23.4%, and in its latest quarter, Vale beat EPS estimates by nearly 70%. Additionally, the company’s bottom line is expected to grow by 7% over the next three to five years.
For those looking for a stream of income, Vale’s got that covered with its annual dividend which yields 7.3%, and a payout ratio of 57%. Additionally, the miner has increased its dividend six times over the last five years, providing an annualized five-year dividend growth rate of nearly 82%. Vale is currently a Zacks Rank #1 (Strong Buy) and has an overall VGM Score of an A.
The Mosaic Company
The Mosaic Company (MOS - Free Report) is a world-leading crop nutrition company that focuses on two of the most vital crop nutrients – potash and phosphate. MOS shares have been scorching the S&P 500 year-to-date, providing shareholders with a remarkable 67% return. Additionally, the company’s forward earnings multiple of 5.9X is considerably lower than the Zacks Fertilizer Industry’s 10.1X. Below is YTD performance of the two.
Image Source: Zacks Investment Research
Fourteen analysts have upwardly revised their estimates over the last 60 days, increasing the Zacks Consensus Estimate by 12% for the next quarter and nearly 28% for the following quarter. Full-year EPS estimates for the current year have increased 30%, and for next year, the consensus estimate trend has increased by a stunning 103%.
Image Source: Zacks Investment Research
Mosaic has missed EPS estimates just one time in its last four quarters, with its most recent quarter falling in line with expectations. The average EPS surprise over this time frame has been a positive 3.7%, and the company’s bottom line is expected to increase by 7% over the next three to five years.
MOS also likes to reward its shareholders, distributing an annual dividend with a modest 0.67% yield and payout ratio of 6%. Additionally, the company has increased its dividend four times in the last five years and expects current full-year EPS to grow 125% year-over-year. Mosaic is currently a Zacks Rank #1 with an overall VGM Score of a B.
Allegheny Technologies Incorporated
Allegheny Technologies Incorporated (ATI - Free Report) is a global manufacturer of technically advanced specialty materials and complex components with a focus on jet engines. Similar to VALE and MOS, shares of the company have soared year-to-date, increasing by 70% in value and once again crushing the S&P 500’s performance. Below is YTD performance of the two.
Image Source: Zacks Investment Research
Nine analysts have upwardly revised their estimates over the last 60 days, causing the Zacks Consensus Estimate to skyrocket 90% for the next quarter and 22% for the following quarter. Current and next year estimates have enjoyed notable increases as well, up 45% for FY22 and up 20% for FY23.
Image Source: Zacks Investment Research
Quarterly reports for ATI have been rock-solid dating back to February 2020, managing to string together nine consecutive quarterly EPS beats. Over the previous four earnings reports, the company boasts an average EPS surprise in the triple-digits at 127%, and in the last quarter, ATI surpassed earnings expectations by that exact amount as well – 127%, or $0.14 per share.
Unlike MOS and VALE, Allegheny Technologies does not currently distribute dividends to shareholders. However, this leaves the company with more cash to invest in operations and other vital areas. Additionally, the current full-year earnings of ATI are expected to grow by a jaw-dropping 660% year-to-year. ATI is currently a Zacks Rank #1 and possesses an overall VGM Score of a C.
Bottom Line
To reap the full benefits of the market, investors must be ready to pivot to sectors with strong relative strength as well as other attractive fundamentals in times of uncertainty.
These three companies have recently displayed remarkable relative strength and have provided shareholders with high-percentage returns over the last year while the market has struggled to find its direction.
A high-performing sector, stellar future growth rates, solid earnings reports, and most importantly, a Zacks Rank #1 are all reasons why I believe VALE, MOS, and ATI deserve spots within your portfolio.