Materials Stocks: Cash In on the Global Recovery

One of these materials stocks has a 3.8% dividend yield. Interested?

Apr 15, 2014 at 12:00AM

Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you'd like to add some materials stocks to your portfolio but don't have the time or expertise to hand-pick a few, the Vanguard Materials ETF (NYSEMKT:VAW) could save you a lot of trouble. Instead of trying to figure out which materials stocks will perform best, you can use this ETF to invest in lots of them simultaneously.

The basics
ETFs often sport lower expense ratios than their mutual fund cousins. This ETF, focused on materials stocks, sports a very low expense ratio -- an annual fee -- of 0.14%. It recently yielded 1.8%.

This materials stocks ETF has outperformed the world market over the past five and 10 years. As with most investments, of course, we can't expect outstanding performances in every quarter or year. Investors with conviction need to wait for their holdings to deliver.

Why materials stocks?
Our global economy is slowly turning itself around. Thus materials stocks are poised to see their fortunes improve as construction and infrastructure projects get underway and manufacturing kicks into a higher gear.

More than a handful of materials stocks had strong performances over the past year. Alcoa (NYSE:AA), for example, surged 55% and yields 1%. It has been struggling in recent years, but its just-reported first-quarter results featured adjusted earnings nearly twice as strong as expected, with its CEO stating that "transformation is accelerating." Alcoa is focusing more on its "value-added" segments, which are focused on the rebounding auto industry, aerospace, and beverage cans. One major challenge for the aluminum industry has been a slowdown in China.

Praxair (NYSE:PX) jumped 18% over the last 12 months and yields 2%. The company specializes in gases and surface coatings. In January, the company reported its fourth-quarter results, featuring earnings up 15%, an 8% dividend hike, and up to $1.5 billion to be spent on stock buybacks. Revenue rose by 7.5%, and operating cash flow hit a record level of $2.9 billion for the year. Bulls are hopeful about significant future growth coming from Asia.

Freeport McMoRan Copper & Gold (NYSE:FCX) gained 14% and yields 3.8%. The company offers substantial diversification beyond gold, as it's the world's second-largest copper-producer, and it also bought several big oil and gas exploration and drilling companies. Its latest oil news is that it will explore off the coast of Morocco. Bulls see much to like about Freeport McMoRan Copper & Gold, such as its relatively low production costs, stable reserve valuations for copper and gold, and growth prospects in China. Indonesia has posed problems for the company, levying taxes on copper exports so high that it stopped shipments, but it recently struck an agreement with the country.

Other materials stocks didn't do quite so well over the last year but could see their fortunes change in years to come. Newmont Mining Corporation (NYSE:NEM), a copper producer, sank 31% and yields 2.5%. It has also been affected by trouble in Indonesia, but it has a good chance of emerging victorious there. Deutsche Bank recently upgraded Newmont Mining from sell to hold. That's a definite improvement but not a ringing endorsement. The bank was pleased with Newmont's recent dividend cut. Investors have also been pleased with its debt refinancing.

The big picture
If you're interested in adding some materials stocks to your portfolio, consider doing so via an ETF. A well-chosen ETF can grant you instant diversification across any industry or group of companies -- and make profiting from it that much easier.

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Selena Maranjianwhom you can follow on Twitter, has no position in any stocks mentioned. The Motley Fool owns shares of Freeport-McMoRan Copper & Gold. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

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KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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