Materials stocks run the gamut. But whether a firm is making steel, refining oil and gas or making distilled spirits, the fact is, in an expanding economy these companies are in very good positions.
As witnessed by the rise in oil prices in recent days, demand is increasing for these fundamental producers as consumers and companies are demanding more products.
This economic unwinding is just starting to play out, now that central banks have once again relinquished control of the economy, it will spell much more dynamic growth.
And this sector is one of the major beneficiaries of this elemental economic growth.
Following are seven A-rated materials stocks to buy that are on track to return solid gains in the quarters to come.
This is going to be a long ride, so get on board soon.
A-Rated Materials Stocks to Buy: Rayonier Advanced Materials (RYAM)
Rayonier Advanced Materials Inc (NYSE:RYAM) is a spinoff of Rayonier Inc. (NYSE:RYN), a timber real estate investment trust (REIT).
RYAM is one of the leading cellulose makers. Cellulose is an organic compound that can be derived from plant sources. In the case of RYAM, it can use the byproduct of the timber undergrowth from its parent company as seed stock for its cellulose.
And cellulose is a very versatile product, used in everything from computer screens to pharmaceuticals to cigarette filters. The point is, the more goods that are made, the more cellulose will be used to make them.
What’s more, there’s a very high barrier to entry into this sector and the top three firms — of which RYAM is one — control about 70% of the market.
RYAM is up 64% in the past year, but relatively flat year to date, so this is a good time to get in before the next leg up.
A-Rated Materials Stocks to Buy: Enduro Royalty Trust (NDRO)
Enduro Royalty Trust (NYSE:NDRO) is a spinoff from privately held Enduro Resource Partners LLC, a US oil and natural exploration and production firm that operates in Texas, New Mexico and Louisiana.
NDRO is set up as a trust to oversee the properties and generate its earnings from the sales of the oil and natural gas from the properties.
NDRO stock pays a monthly dividend — technically a cash distribution, since shareholders are considered owners in a trust — slightly more than 1% of its current price. Over a year, that’s a dividend reaching beyond 12%.
This is a tiny stock, with a market cap that’s just over $100 million, so don’t chase it. But it’s a good buy at current prices as the price of the dollar and oil strengthen.
A-Rated Materials Stocks to Buy: Schnitzer Steel Industrials (SCHN)
Schnitzer Steel Industries, Inc. (NASDAQ:SCHN) is a metals recycler based in Portland, Oregon.
It takes scrap metal, processes it and then sells it to steel mills, foundries and smelters, predominantly in the U.S. and Western Canada.
Given the tariff talk in Washington, domestic steel resources are a good place to be right now. In early April SCHN reported its 2Q numbers and they came in strong, which is a positive sign, since this doesn’t include any of the price movement in steel and other metals since the trade war of words started.
Up 66% in the past year, this is just the beginning for this $800 million company. Metals are the bellwether for an expanding economy, so this kind of price action is bullish indeed.
A-Rated Materials Stocks to Buy: Kirkland Lake Gold (KL)
Kirkland Lake Gold Ltd (NYSE:KL) is a gold producer with mines in Canada and Australia. It’s targeting to produce 620,000 ounces of gold this year.
Regardless of the constant talk about bitcoin and other cryptocurrencies, gold is still the long-time favorite hard asset. It has not been seeing much love as some investors have found digital currencies much cooler. But gold has been a key store of value for thousands of years for a reason, and bitcoin and its ilk aren’t likely to supplant the Midas metal anytime soon.
And gold has been steadily rising in the past year, given the increasing volatility in the markets and out of Washington, D.C. And as inflation starts to rise, gold rises as well. It becomes a strategic hedge against devalued currencies.
KL is a mid-tier player with a $3.5 billion market cap. Q1 production is up 13% over Q1 growth last year, which is a bullish sign.
A-Rated Materials Stocks to Buy: Sabine Royalty Trust (SBR)
Sabine Royalty Trust (NYSE:SBR) is a trust formed by Sabine Oil & Gas, an exploration and production company that operates in Texas.
SBR holds the property and mineral rights to the producing and undeveloped lands in its portfolio, which are located in Florida, Louisiana, Mississippi, New Mexico, Oklahoma and Texas.
SBR has a $640 million market cap and delivers a solid 5.5% dividend. The dividend is considered cash distribution since shareholders are viewed as partners in a trust, so this is the way investors get paid directly from profits.
Energy prices look to be in an uptrend and this may well last for years, so finding a good domestic producer to buy into now is a good idea.
A-Rated Materials Stocks to Buy: Valero (VLO)
Valero Energy Corporation (NYSE:VLO) is the world’s largest independent petroleum products refiner and one of the largest markets and refiners of ethanol.
To save a lengthy explanation of how well refiners are doing as demand increases for natural gas and oil products, simply look at a price chart for VLO stock. This is a company with a $43 billion market cap that is up 66% in the past year. That is some significant price performance.
And as an independent producer, it means it can sell its products to its downstream retail and commercial distribution centers or contract it to other retailers.
As long as the global economy continues to expanding, VLO is going to be doing a bang-up business. And as U.S. natural gas exports start to ramp up in coming years, it will do even better.
A-Rated Materials Stocks to Buy: MGP Ingredients (MGPI)
MGP Ingredients Inc (NASDAQ:MGPI) has a very unique business. It produces and supplies distilled spirits and specialty wheat proteins for food products.
Given this business plan, it’s no surprise that MGPI is located in Kansas, the heart of the heartland.
The company has a couple things going for it. First, it’s a specialized business that has a solid competitive moat around it. Second, the craft cocktail movement is growing just like the craft beer movement did and continues to this day.
MGPI will work with customers to distill a bourbon, rye, gin or vodka to the specs the customer desires or will sell them the base ingredients for them to do it themselves.
While it has a few brands of its own — TILL American Wheat Vodka, Tanner’s Creek Blended Bourbon Whiskey and George Remus Straight Bourbon Whiskey — most is distilled for other labels. And business is going very well. MGPI stock is up 63% in the past year, with more to come.
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Source: Investor Place