Not all investments need to be flashy. To cash in on growth stocks often requires finding a company with a unique product or service. Consider the breakneck growth for Apple (ticker: AAPL) after its line…
Not all investments need to be flashy.
To cash in on growth stocks often requires finding a company with a unique product or service. Consider the breakneck growth for Apple (ticker: AAPL) after its line of smartphones connected with consumers. Product cycles come and go — just ask BlackBerry (BB), which was the gold standard for mobile devices until Apple unseated it. Many investors find comfort in rather boring materials and chemicals companies with a stable business. Regardless of which flashy gadgets or fashion trends are in favor, investors can be sure things like steel and plastic will be in use somewhere. For this kind of certainty, consider these raw materials stocks for your portfolio.
Brazilian steel giant Gerdau operates worldwide, offering varied products from galvanized wires for fencing, steel rebar for construction and metal auto parts. Concerned Gerdau would be a big target in today’s tariff tiffs? Interestingly, the posturing is mostly between the U.S. and China, leaving this South American steel maker free to serve both markets. With a modest market capitalization of about $5 billion and revenue on the upswing thanks to reasonably strong global economic growth, GGB remains fairly stable — and its dividend remains secure. Just keep in mind that as a foreign entity, the payouts can fluctuate slightly from quarter to quarter.
One of the biggest materials and chemicals plays is DowDuPont, a $160 billion corporation that touches just about every industry, with agricultural chemicals, paint pigments, branded specialty polymers like Corian countertops, Lycra stretchable fabric and Teflon non-stick coating. A massive merger last year reportedly includes a longer-term plan to separate the conglomerate into smaller and more specialized subsidiaries instead of one massive company. But in 2018, the collective might of DowDuPont is unrivaled — and generates a nice dividend.
A unique play on the fracking boom, Hi-Crush is not an oil or gas exploration company or refiner. Instead, it provides specialized sand and minerals used in this 21st century energy process. It is the sand-infused liquid that is forced into shale formations to cause fractures in the rock that release gas for capture. And while there is not as much upside as with some high-flying explorers, the fact that Hi-Crush is more of a utility for the industry has allowed for a steady stream of income and low-risk returns that are attractive to dividend investors.
Another South American metals giant, Vale is a mining behemoth that extracts materials such as iron, copper and gold from many sites around the world. The company also has remained above the trade war fray and also benefits from the increased prospect of inflation in base metal prices. Founded in 1942 and currently over $70 billion in market value, this global powerhouse has staying power. And while the fortunes of VALE stock admittedly rise and fall on cyclical trends, the strong global economy has allowed this stock to hang tough in 2018 and provide consistent dividend to shareholders.
Ciner mines specialty materials including trona ore and soda ash, which are are key components of baking soda. That may not sound especially glamorous, but anyone who has made a makeshift volcano from baking soda and vinegar should know the chemical potential of this stuff is very real — and can be applied to much more than cupcakes. A small-cap miner in a specialty product, CINR has a bit higher risk profile than some of the other names on this list. However, the yield is tremendous and the niche nature of the business makes it unlikely CINR will see big disruption soon.
When it comes to materials, the big player is global mining giant BHP Billiton. With a market capitalization of more than $120 billion and varied worldwide operations including zinc, copper, iron ore and coal. In many ways BHP is an easy pick for an investor seeking exposure to the metals market. With a robust dividend, long-term investors have a lot to like about this key materials stock. Just remember, however, that size isn’t always a good thing — and in recent years, BHP has been moving to exit energy-related assets and streamline its portfolio. There’s a lot of organizational complexity and inefficiencies management has been working on.
A strange and specialized play, Westlake Chemical Partners is focused on ethylene production — a family of hydrocarbons that is a component in chemicals used in a wide variety of applications. These include producing polyethene plastics for shopping bags, soap bottles or a host of other everyday objects. The bad news for investors is that ethylenes are relatively easy to produce and don’t command tremendous pricing. But the plus side is baseline demand is enormous given the wide array of uses — and that ensures a steady stream of income for Westlake, if not a lot of profit potential.