Back to top

Analyst Blog

Basic Materials, one of the 16 broad Zacks sectors, which left investors disappointed in second-quarter 2016, does not promise a major improvement in the third quarter. The sector (accounting for 2.5% of the S&P 500 index’s total market capitalization) is likely to record roughly a 2.1% fall in earnings and 3.2% decline in revenue for the September-ended quarter.

According to the Zacks Industry classification, Basic Materials can be further sub-divided into four industries including Chemicals & Fertilizers, Metals-Non Ferrous, Steel and Paper.

The prevalent uncertainties in the global arena have been impacting the materials stocks in the last few quarters. Weak prices and low demand in the energy sector are major concerns. Also, weak economic conditions in some developed and developing nations, the United Kingdom’s decision to exit the European Union, and unfavorable foreign currency movements have influenced international trades. Adding to the woes is the prediction of roughly 0.8% contraction in world steel demand in 2016 by the World Steel Association as well as a struggling Chinese economy.      

The sector was one of worst performing Zacks sectors in September. In the S&P 500 group, The Mosaic Co. (MOS - Free Report) and CF Industries Holdings, Inc. (CF - Free Report) were the worst hit with their share price falling roughly 16.15% and 4.88%, respectively in the last four weeks. Both the stocks carry a Zacks Rank #5 (Strong Sell). In addition, Praxair Inc. (PX - Free Report) and PPG Industries, Inc. (PPG - Free Report) with Zacks Rank #4 (Sell) also saw their shares tank. Among the non S&P companies, share price of Energy Fuels Inc. (UUUU - Free Report) and Intrepid Potash, Inc. (IPI - Free Report) fell the most in the last four weeks. Both the stocks carry a Zacks Rank #4.

5 Materials Stocks Worth Buying Despite Poor Sector Performance in September

Despite the current sluggishness and gloomy outlook for the materials stocks, investors seeking exposure in the sector can go for a few stocks with potential for growth in the near term. Below we discuss five material stocks that struggled in September, but are worth buying now.

Acacia Mining plc (ABGLF - Free Report) , a London-based gold mining company, saw nearly 16.78% fall in its share price in the last four weeks. However, its Zacks Rank #2 (Buy) and roughly 23.1% positive change in earnings estimates for 2016 make it a good investment option.

New Glod, Inc. (NGD - Free Report) is a Canadian gold mining company. It suffered setback in the last four weeks, having lost nearly 14.03% in share price. However, a favorable ranking and nearly 60% growth in earnings estimate for 2016 works in favor of the company. It currently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Gold Fields Ltd. (GFI - Free Report) , a South African gold mining company, carries a Zacks Rank #2. The company lost nearly 9.01% in share price in the last four weeks. However, a positive 13.5% revision in estimates for 2016 and favorable ranking makes it a sound turnaround pick.

Nevsun Resources Ltd. is Africa-based natural resources mining company. The stock lost nearly 5.31% in share price in the last four weeks, but its Zacks Rank #2 and positive 44.4% revision in earnings estimates for 2016 works in its favor.

Pan American Silver Corp. (PAAS - Free Report) is a Canadian silver mining company, sporting a Zacks Rank #1. Earnings estimates for 2016 has been revised up by 10%. The company lost nearly 2.38% in share price in the last four weeks.  

Confidential: Zacks' Best Investment Ideas  

Would you like to see a hand-picked "all-star" selection of investment ideas from the man who heads up Zacks' trading and investing services? Steve Reitmeister knows when key trades are about to be triggered and which of our experts has the hottest hand. Click for his selected trades right now >>