Consider These 3 Winning Materials Sector Stocks

Materials Stocks Are A Great Idea As Infrastructure Ramps Up

It's unquestionably true that the materials sector is one of Wall Street's most humdrum industries. However, no one can deny that stock experts perked up at specific periods during 2021 when certain materials firms shined in the limelight.

As a result of the pandemic's lingering effects and infrastructure changes, economic recovery as well as infrastructure investments will accelerate. What will benefit? It's simple — materials companies.

What is the Materials Sector?

Let's have a look at the fundamentals of material stocks and several subsectors within the industry. Materials, often locked in commodities, deal with the exploration, extraction, and processing of raw materials. So what exactly do you call raw materials? Here's a list of some of the materials industry's sub-sectors: chemicals, metals and mining, forestry (including paper and construction materials), and containers and packaging.

The materials sector, as we saw during the height of the pandemic, is exceptionally sensitive to fluctuations in the global economy, the US dollar, and, unfortunately, price hikes.

Chemicals: The chemicals sector is responsible for the creation of more than 70,000 distinct items by transforming raw materials. According to the Cybersecurity and Infrastructure Security Agency, several hundred thousand chemical production facilities, from petrochemical producers to chemical distributors, create, manufacture, store, transport, and deliver chemicals along the supply chain in the United States.

Construction materials: Companies that operate construction materials mines, quarries, and processors of raw materials used for both heavy and residential construction. Cement, sand and gravel, clay, concrete, and marble are all common materials utilized.

Glass: Sheet glass, optical glass, fiberglass, household glassware, glass containers, and the glass utilized in construction, illumination engineering, and electrical engineering are all made by the glass industry.

Paper: Wood is used in a variety of industries, including papermaking, papermaking from wood, and other cellulose-based products.

Forest products and related packaging products: This industry is dominated by packaging, tissue papers, and pulp for hygiene products and textiles. The packaging business continuously seeks new applications for wood and its components. The packing sector may be expected to experience continual, unanticipated transformation in the future.

Metals, minerals, and mining companies: Excavating and processing metals, minerals, and other geological resources are all part of metallurgy. It also refers to producers of steel.

Materials Stocks to Add in 2022

What trends might you expect to see develop in this sector in the next year? Let's take a look at some of the headliners for 2022 from this market.

UNITED STATES STEEL CORPORATION (NYSE: X)

Despite steel input prices climbing and supply chains and logistics taking hits, the steel industry has zipped to all-time highs and has faced stiff headwinds in the first three quarters of 2021. When supplies increased, steel did hit a wall.

Even so, we're looking at the United States Steel Corporation (NYSE: X), an iconic corporation based in Pittsburgh, Pennsylvania. U.S. Steel Corp. is a steel producer based in Pittsburgh, Pennsylvania that produces and sells flat-rolled products (steel slabs, strip mill plates, sheets, iron ore), as well as U.S. Steel Europe (strip mill plates, spiral welded pipe) and tubular products (welded steel casing and tubing).

In Q3 2021, U.S. Steel generated net earnings of more than $2 billion, or $6.97 per diluted share, after tax adjust net earnings of more than $1.543 billion, or $5.36 per diluted share, and adjusted EBITDA of more than $2 billion.  It has the liquidity to $4.503 billion, including cash of $2.044 billion.

It may be a solid investment for value investors in 2022.

CLEVELAND-CLIFFS (NYSE: CLF)

Cleveland-Cliffs is the world's largest flat-rolled steel producer, as well as the continent's leading iron ore pellet maker. The vertically integrated firm specializes in iron production, steelmaking, rolling, hot and cold stamping of steel components and parts, and more. This makes it somewhat of a rival to US Steel.

Cleveland-Cliffs's financial health and growth prospects (growth potential, lower debt position, and vertically integrated business) provide a basis for outperformance. Thanks to a recent acquisition, earnings have exploded at an incredible rate.

The revenue of Cleveland-Cliffs rose to $6 billion in the fourth quarter, compared to prior-year Q3 results of $2.3 billion, net income of $1.3 billion, or $2.33 per diluted share, and record quarterly adjusted EBITDA of $1.9 billion. For the first nine months of 2021, Cleveland-Cliffs reported revenues of $15.1 billion and net income of $2.1 billion, or $3.69 per diluted share, compared to $3.1 billion in the first nine months of 2021 and a net loss of $155 million or a loss of$0.51 per diluted share.

MATERIALS SELECT SECTOR SPDR ETF (NYSE ARCA: XLB)

If you want to be exposed to materials stocks from a bigger portion of the market, consider the diversified exchange-traded fund (ETF) Materials Select Sector SPDR ETF (XLB).

The following firms are among its top holdings (which may also be sources of stock ideas for your portfolio):

The Materials Select Sector SPDR ETF is a managed fund run by State Street Global Advisors that invests in equities derived from the global precious metals and mining sector. This ETF has over $8 billion in assets under management, offers low expenses, transparency, flexibility, and tax efficiency. The expenses of running this ETF each year are 0.12%, which is one of the sector's lowest costs. This ETF may be your method to get into long-term investing if you're looking for a diversified strategy.

Selecting the Proper Materials Stocks for Your Portfolio

Convinced materials stocks are a good investment? Consider all of the ramifications and pick up a few of these solid options through your broker. Materials stocks can also help you navigate inflation, which is fantastic news when the inflation statistics are so dark.

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