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Don’t Use These Materials to Build Your Retirement Portfolio

Photo credit: Walter Energy 

There is a case to be made for investing in material stocks like Alcoa (NYSE: AA  ) , Walter Energy (NASDAQOTH: WLTGQ  ) , or Cliffs Natural Resources (NYSE: CLF  ) . All three companies have been battered by the financial crisis, but a slowly growing economy could be just what these companies need to thrive in the future. That being said, there's way too much risk involved with all three, which is why you don't want to use these material stocks as building blocks for your portfolio.

I've created the following slideshow to show both the risks and rewards of investing in these material stocks. For example, while Alcoa is benefiting from the rise of aluminum in vehicles, it is still way too exposed to the commodity price of aluminum. Meanwhile, iron ore producer Cliffs Natural Resources and coal miner Walter Energy aren't in the best financial shape, which just isn't the best building block for your retirement.

Instead of owning these material stocks like Alcoa, Cliffs Natural Resources or Walter Energy investors should stick with safer companies that aren't as exposed to commodity pricing pressure. That's why I'll detail one sector that investors should consider instead as strong contracted cash flow and visible growth potential make it a much better building block for a retirement portfolio.

This is where to invest for retirement
Record oil and natural gas production is revolutionizing the United States' energy position. It's also providing an enormous opportunity for midstream companies to thrive. However, these companies have one more secret to success. Each are using a small IRS "loophole" to help line their investors' pockets with money. That's why investing in this sector is a retirement strategy you need to learn and can do so by checking out our special report "The IRS Is Daring You To Make This Energy Investment." Don't miss out on this timely opportunity; click here to access your report -- it's absolutely free. 


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  • Report this Comment On May 27, 2014, at 3:11 PM, Mark2013 wrote:

    This is an interesting article because its title says it all if one is wise enough to understand sectors in the markets. Is coal for example going away even this century? No. Why? Because out of the energy pie it alone makes up the highest percentage of our energy in the States and combine with natural gas brings 67% of energy to the entire nation at this time leaving wind and solar in the dust because those two clean sectors can never work in the States in a major way until we have a nation of all windy and sunny Cities and Towns. Most places have what is known as rain, clouds, snow, ice, sleet, freezing rain, hurricanes, tornadoes and on and on with many days of light or no breezes so it is silly to think that sector is valuable for the States.

    Coal is used to make certain materials and there is such a thing as clean coal yet coal can and has produced pollution in the past and although global warming was proven to be a fraud and humans have very little control over climate, pollution can harm people and even kill if too much pollution so making coal clean is key goal.

    Coal is of course under political attack right now and is hated on by investors so some really great companies like ANR & ACI are very low in PPS. Both have great book values and ANR also supports a great cash per share value too. Neither have a going concern problem. Both are likely to hit $40 again with ANR most likely to hit above $60 PS in the future. Remember, a president can't even lower or increase taxes so he lacks powers most think he/she has. Congress holds the power over these matters but Republicans are great for bashing various pharmaceutical and Democrats for bashing COAL and when a figurehead declares war on coal people panic and I buy. Midterm elections coming up and if Republicans win, coal rockets imo.

    Coal is also at the turning point in the sector so is really going to in the future charts out five years from now show this as the bottom flat line right before it shot up and is heading BACK DOWN so many will kick themselves for having not bought low and sold at a thousand percentage points higher imo.

    Is coal a buy NOW? Yes imo because it is at the bottom going sideways about to start to go up again but is it a sector to just buy and hold onto for retirement? NO WAY unless one is buying now and going to retire in three or four years because coal will be up and down a lot before one retires and on average up every three and down every three sometimes four years so buying now in ones 20s or 30s could mean ending up with no great gains since it could be back down again at retirement or at least not sitting at a thousand percent in profits. This isn't wireless electricity to come and the current 3D printing sectors.

    I would NEVER believe anyone under age 60 should buy this sector bases on a hold through retirement which is an older age all the time now around 68 for many who work through early 70s sometimes. It would simply be a strong buy based on getting in, forgetting about it for a couple years then checking to see if it is then at the top of the new future line on the chart or heading near it and then getting ready to sell, wait and do it all over again. Sort of like day trading but year trading instead, buying low and selling high


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Matt DiLallo

Matthew is a Senior Energy and Materials Specialist with The Motley Fool. He graduated from the Liberty University with a degree in Biblical Studies and a Masters of Business Administration. You can follow him on Twitter for the latest news and analysis of the energy and materials industries:

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8/28/2015 4:00 PM
AA $9.41 Up +0.55 +6.21%
Alcoa, Inc. CAPS Rating: ****
CLF $3.83 Up +0.10 +2.68%
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WLTGQ $0.13 Up +0.05 +58.23%
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