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In this piece, we will take a look at the 12 best metals stocks to invest in. If you want to skip our introduction to the metals industry and the determinants of its performance, then you can skip ahead to 5 Best Metals Stocks To Invest In.
The metal industry is the backbone of the global economy. And conversely, the global economy is also a key determinant of the industry's performance. This is because the biggest users of metals are industries, which rely on them to build heavy duty industrial products such as jet engines, excavators, and crawlers. Industries are joined by the construction industry which is one of the biggest users of steel in the world. While steel is not directly a metal, it relies on iron since the material is actually a compound that mixes carbon and iron to increase durability and strength.
Naturally, metal stocks fluctuate with global investor sentiment about the economy. Robust economic output means that there is more construction and greater industrial activity which leads to greater demand for metals and more revenue for the firms. In 2023, the key question on metal investors' minds is the outlook for China. China is one of the biggest infrastructure spenders in the world, and its Belt and Road initiative is a maze of roads that seeks to connect countries together and help maintain Chinese industrial output. This year, the metal industry has slowed down due to turmoil in the Chinese construction sector. Data shows that the Chinese property segment accounts for a whopping 20% of global steel demand, 18% of aluminum demand, and 6% of copper demand.
Yet, the Chinese construction industry's effects on the metal industry aren't the first disruption that the sector has faced over the recent months. In fact, the 2022 Russian invasion of Ukraine also had a negative effect on the sector. An uptick in demand for metals and materials such as nickel and steel created disruption in the market and made metals prices, as measured by the World Bank’s Metals and Minerals Price Index, rise by 13% during the first quarter of 2022. On an individual basis, prices of iron ore, aluminum, nickel, tin, and zinc rose by 27%, 18%, 35%, 12%, and 11% respectively on an annual basis in March 2022.
The metals sector is not only important for today's industries but also for industries of the future. This is primarily due to the importance of one of the softest and most volatile metals you're likely to find, lithium, and its criticality to the electric vehicle industry. As you're likely to know, lithium is essential for battery production due to its electro-chemical properties. This demand implies that global lithium demand could grow by as much as ten times between 2021 and 2030 according to estimates from the consulting firm McKinsey. It believes that global lithium carbonate demand can grow from 500 thousand metric tons in 2021 to 5 million metric tons by 2030, and lithium companies will have to utilize innovative manufacturing technologies to ensure that they are able to meet demand. If you're interested in learning more about the global lithium industry and the countries that can dominate it in the future, then you can read Lithium Reserves by Country: Top 15 Countries.
Additionally, while lithium is often considered to be the most important metal for the global shift to renewable energy, the reality is that without iron the world might find it difficult to reduce its reliance on polluting energy. Iron is important for the renewable energy sector since it is used to make steel, and we've explained this in detail as part of our 10 Metals Stocks with Insider Buying coverage. If you're wondering about the top three stocks in this list, then these are Paramount Gold Nevada Corp. (NYSE:PZG), Trilogy Metals Inc. (NYSE:TMQ), and TMC the metals company Inc. (NASDAQ:TMC).
Shifting gears, another metal that has been in the spotlight ever since the U.S. dollar started to appreciate in the wake of the Federal Reserve's rapid interest rate is gold. Gold is a multi purpose metal that is used in electronics manufacturing, decoration, and finance. Gold prices rise if investors expect interest rates to come down since the dollar drops, and vice versa.
As for the outlook for gold, here's what the management of Wheaton Precious Metals Corp. (NYSE:WPM) had to say during the firm's second quarter of 2023 earnings call:
Strong commodity prices, coupled with our solid production base, resulted in revenue of $265 million and a gross margin of $152 million. Of this revenue, 56% was attributable to gold, 41% to silver, 2% to palladium, and 1% to cobalt. As at June 30, 2023, approximately 103,000 GEOs were in PBND and cobalt inventory, representing approximately 2.1 months of payable production, which is a level that is consistent with the preceding four quarters. G&A expenses amounted to $10 million for the second quarter, and the company anticipates that G&A will amount to $40 to $43 million for the year. Adjusted net earnings amounted to $143 million, a $7 million decrease relative to the second quarter of 2022. It is worth noting, though, that when comparing the results to the prior year, the estimated impact to net earnings associated with the relative changes in PBND was $18 million, meaning we would have exceeded prior year’s net earnings if not for the timing of deliveries.
So, with the third quarter earnings season for the metal industry nearly with us, we decided to take a look at the top metal stocks to buy with the top three picks being Freeport-McMoRan Inc. (NYSE:FCX), Teck Resources Limited (NYSE:TECK), and Newmont Corporation (NYSE:NEM).
12 Best Metal Stocks To Invest In
A close-up of a modern semiconductor chip, intricately wired and gold plated. Editorial photo for a financial news article. 8k. --ar 16:9
Our Methodology
To compile our list of the best metal stocks to buy, we first made a list of the 47 biggest aluminum, copper, gold, silver, lithium, and other industrial and precious metals stocks by their market capitalization. Then, those with the greatest number of hedge fund investors as of Q2 2023 were selected as the best metal stocks to buy.
12 Best Metal Stocks To Invest In
Number of Hedge Fund Investors In Q2 2023: 27
Constellium SE (NYSE:CSTM) is an industrial products company that sells aluminum to aerospace, transportation, and other users. The firm has been dealing with a slowing global economy as of late since its revenue for the first nine months of 2023 has dropped by 10% annually and is accompanied by a 5% shipments drop.
During 2023's June quarter, 27 out of the 910 hedge funds part of Insider Monkey's research had invested in Constellium SE (NYSE:CSTM). Jared Nussbaum's Nut Tree Capital is the firm's biggest shareholder in our database since it owns a $68 million stake that comes via 4 million shares.
Along with Teck Resources Limited (NYSE:TECK), Freeport-McMoRan Inc. (NYSE:FCX), and Newmont Corporation (NYSE:NEM), Constellium SE (NYSE:CSTM) is a top metal stock to invest in according to hedge fund sentiment.
Number of Hedge Fund Investors In Q2 2023: 29
Rio Tinto Group (NYSE:RIO) is one of the biggest diversified mining companies in the world. The firm is currently transforming its operations in Australia by building autonomous trains to carry its products. The shares are rated Strong Buy on average and the average share price target is $83.17.
Insider Monkey scoured through 910 hedge fund holdings for this year's second quarter and found that 29 had bought the firm's shares. Rio Tinto Group (NYSE:RIO)'s largest hedge fund investor is Ken Fisher's Fisher Asset Management through its $950 million investment.
Number of Hedge Fund Investors In Q2 2023: 29
Hudbay Minerals Inc. (NYSE:HBM) is a pure play metals miner that focuses its attention on extracting copper concentrates. Despite the fact that the firm has not beaten analyst EPS estimates since Q3 2022, its shares are still rated Strong Buy on average and analysts have priced in a $2.96 share price upside over the current share price of $4.30.
29 hedge funds among the 910 tracked by Insider Monkey were Hudbay Minerals Inc. (NYSE:HBM)'s investors as of June 2023 end. Thomas E. Claugus's GMT Capital is the biggest stakeholder, owning 34.3 million shares that are worth $164 million.
Number of Hedge Fund Investors In Q2 2023: 30
Vale S.A. (NYSE:VALE) is another diversified mining giant. It produces a wide variety of metals such as iron, gold, silver, and nickel. The firm was out with some disappointing news for investors in October 2023, as it shared that disruption in a Brazilian mine led to a 3.9% third quarter output decline.
For their shareholders during 2023's second quarter, 30 out of the 910 hedge funds polled by Insider Monkey had held a stake in the firm. Vale S.A. (NYSE:VALE)'s largest stakeholder among these is Ken Fisher's Fisher Asset Management since it owns $242 million worth of shares.
Number of Hedge Fund Investors In Q2 2023: 31
Livent Corporation (NYSE:LTHM) is a chemical company that sells lithium for battery production. It is one of the biggest lithium producers in the industry, and the firm aims to grow its sales volume by 20% next year in order to keep up with competitors.
Insider Monkey's second quarter of 2023 survey covering 910 hedge funds revealed that 31 funds were Livent Corporation (NYSE:LTHM)'s investors. Ken Griffin's Citadel Investment Group is the firm's biggest hedge fund investor courtesy of its $59.7 million stake.
Number of Hedge Fund Investors In Q2 2023: 31
Barrick Gold Corporation (NYSE:GOLD) is one of the biggest gold mining companies in the world. These days, it is seeking to grow its presence in the developing world, and has placed its bets on a mining project in Pakistan with the aim to start production a couple of years from now.
As of June 2023 end, 31 out of the 910 hedge funds tracked by Insider Monkey had bought the firm's shares. Barrick Gold Corporation (NYSE:GOLD)'s largest investor in our list of hedge funds is Jean-Marie Eveillard's First Eagle Investment Management through its $715 million investment.
Number of Hedge Fund Investors In Q2 2023: 34
Alcoa Corporation (NYSE:AA) is an aluminum mining company headquartered in Pittsburgh, Pennsylvania. Its third quarter of 2023 earnings were a disappointing bunch since the firm saw lower prices led to an annual revenue drop and overall, the firm missed analyst EPS estimates.
34 out of the 910 hedge funds part of Insider Monkey's Q2 2023 database had held a stake in Alcoa Corporation (NYSE:AA). Out of these, the biggest shareholder is Patrick Degorce's Theleme Partners as it owns 4.2 million shares that are worth $144 million.
Freeport-McMoRan Inc. (NYSE:FCX), Alcoa Corporation (NYSE:AA), Teck Resources Limited (NYSE:TECK), and Newmont Corporation (NYSE:NEM) are some top hedge fund metal stocks.
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Disclosure: None. 12 Best Metal Stocks To Invest In is originally published on Insider Monkey.
In this article, we will be taking a look at the 11 best metal stocks to invest in. To skip our detailed analysis of these stocks and the metals sector, you can go directly to see the 5 Best Metal Stocks to Invest In.
Metals and precious metals have been on the rise as far as prices are concerned since the start of 2022. One of the main reasons for the rise is the Russian invasion of Ukraine, causing disruptions in global markets for critical raw materials including a variety of metals such as nickel and stainless steel. As a result, the World Bank's Metals and Minerals Price Index rose by 13% in the first quarter of 2022, according to a Commodity Markets Outlook Report published by the World Bank this April. Similarly, the bank's Precious Metals Index gained 4% over the same period. Both the rises were driven by a higher demand in investment when it came to metals and precious metals. This increase in demand was seen to be directly related to the Russian-Ukrainian crisis.
As a result of the above, stocks such as the Rio Tinto Group (NYSE:RIO), Wheaton Precious Metals Corp. (NYSE:WPM), and Steel Dynamics, Inc. (NASDAQ:STLD), among others, have been benefitting from increasing popularity in investment circles. The World Bank expects metal prices to rise by a further 16% in 2022, while precious metals are expected to see a slight rise in prices as well.
Aluminum, copper, nickel, and tin prices were seen to reach historically high levels in March 2022. Higher energy costs causing production constraints also contributed to these developments. Individually, iron ore, aluminum, nickel, tin, and zinc prices rose by 27%, 18%, 35%, 12%, and 11%, respectively.
Photo by Russ Ward on Unsplash
Let's now take a look at the 11 best metal stocks to invest in.
Our Methodology
We have selected metals stocks that have recently been performing well in the sector, based on factors such as projected growth rates in their EPS, revenue, and free cash flow, alongside positive news driving up share prices and the latest earnings results. The stocks are highly popular among hedge funds and analysts alike, based on Insider Monkey's hedge fund data for the second quarter and analysts' ratings and price targets over the past three months. They are ranked based on the number of hedge funds holding stakes in them, from the lowest to the highest.
Number of Hedge Fund Holders: 20
ArcelorMittal (NYSE:MT) operates integrated steel and mining companies in Europe, North and South America, Asia, and Africa. The company's metal products include semi-finished flat products such as slabs, hot and cold-rolled coils and sheets, tinplates, and color-coated coils. It is based in Luxembourg City, Luxembourg.
Deutsche Bank's Bastian Synagowitz holds a Buy rating on shares of ArcelorMittal (NYSE:MT) as of October 7.
This August, ArcelorMittal (NYSE:MT) commented that it sees Brazilian steel consumption doubling within a decade in light of rising demand for more infrastructure. The company is thus investing about $3.9 billion in Brazil with almost 40% intended to expand production capacity by 2024. In the second quarter, ArcelorMittal's (NYSE:MT) EPS was $4.24, beating estimates by $0.34, and its revenue was $22.14 billion, also beating estimates by $393.35 million.
ArcelorMittal (NYSE:MT) was found among the 13F holdings of 20 hedge funds in the second quarter. Their total stake value was $640 million. GQG Partners was the largest stakeholder in the company, holding 11.2 million shares worth about $254 million.
Voss Capital, an investment management firm, mentioned ArcelorMittal (NYSE:MT) in its fourth-quarter 2021 investor letter. Here's what the firm said:
“ArcelorMittal is a global integrated steel producer trading at around 2x EBITDA which will likely generate over 50% of their market cap in free cash flow in the next 8-10 quarters. This is after a period of substantial deleveraging which now allows the company to use FCF primarily towards share buybacks. We also believe the company’s numerous joint ventures have an underappreciated $10+ billion of value. When accounting for this, we believe MT is even cheaper on a price/tangible book basis (~0.4x).
If the company can simply maintain its multiple while returning most, if not all, that FCF to shareholders in the form of buybacks, we believe 50%+ upside is conservative. Given the company’s deleveraged balance sheet, even if steel pricing and profitability decline materially, we believe the downside will be limited as historically MT trades in a range of 5-7x EBITDA versus the current 2x. “
ArcelorMittal (NYSE:MT), like Rio Tinto Group (NYSE:RIO), Wheaton Precious Metals Corp. (NYSE:WPM), and Steel Dynamics, Inc. (NASDAQ:STLD), is one of the top metal stocks elite hedge funds are eyeing this year.
Number of Hedge Fund Holders: 21
Commercial Metals Company (NYSE:CMC) works to manufacture, recycle, and fabricate steel and metal products. It also offers related materials and services in the US, Poland, China, and internationally. The company sells ferrous and nonferrous scrap metals to steel mills, foundries, aluminum sheet and ingot manufacturers, brass and bronze ingot makers, and other consumers.
David Gagliano at BMO Capital holds a Market Perform rating on shares of Commercial Metals Company (NYSE:CMC) as of October 14. The analyst also raised his price target on the stock from $37 to $43.
This October, Commercial Metals Company (NYSE:CMC) raised its quarterly dividend by 14.3%, bringing it up to $0.16 per share. Over the past five years, the company's dividend had a compound annual growth rate of 3.13%. Analysts at Citigroup such as Alexander Hacking foresee Commercial Metals Company's (NYSE:CMC) 2023 earnings results to remain very strong after the company beat fourth-quarter estimates.
There were 21 hedge funds long Commercial Metals Company (NYSE:CMC) in the second quarter, with a total stake value of $301 million.
Fairholme Capital Management, an investment management company, mentioned Commercial Metals Company (NYSE:CMC) in its half-year 2022 investor letter. Here's what the firm said:
“Commercial Metals Company (NYSE:CMC) recycles scrap into rebar essential for the strengthening of concrete found everywhere. CMC is priced at five times estimated earnings and pays a 1.6% dividend that I expect to grow with profits. To better understand the Fund’s recent infrastructure investments, I recommend Vaclav Smil’s How the World Really Works.”
Number of Hedge Fund Holders: 22
Nucor Corporation (NYSE:NUE) is a manufacturer of steel and steel products. It produces hot-rolled, cold-rolled, and galvanized sheet steel products, plate steel products, wide-flange beams, beam blanks, and H-piling and sheet piling products, among more. The company is based in Charlotte, North Carolina.
An Outperform rating was reiterated on shares of Nucor Corporation (NYSE:NUE) on September 16 by analyst Curt Woodworth at Credit Suisse. The analyst also placed a $140 price target on the stock.
Nucor Corporation (NYSE:NUE) declared a $0.5 per share quarterly dividend this September and boasts consistent dividend growth over the past 48 years. In the second quarter, Nucor Corporation (NYSE:NUE) had an EPS of $9.67, beating estimates by $0.91, and its revenue was $11.79 billion, also beating estimates by $205.54 million.
Our hedge fund data shows 22 hedge funds long Nucor Corporation (NYSE:NUE) in the second quarter, and 26 hedge funds long the stock in the previous quarter. Their total stake values were $260 million and $186 million, respectively.
Number of Hedge Fund Holders: 25
MP Materials Corp. (NYSE:MP) is a diversified metals and mining company operating rare earth mining and processing facilities. The company owns and operates the Mountain Pass Rare Earth mine in the Western Hemisphere. It also holds mineral rights to the Mountain Pass mine and surrounding areas.
Canaccord's George Gianarikas holds a Buy rating on shares of MP Materials Corp. (NYSE:MP) as of September 28. The analyst also placed a $40 price target on the stock.
This August, MP Materials Corp. (NYSE:MP) posted its second-quarter adjusted earnings which showed its revenues nearly doubling to $143 million. The company's earnings benefitted from a 90% rise in the prices of rare earth materials used to make electric vehicles. MP Materials Corp.'s (NYSE:MP) net income almost tripled to $73.3 million from $27.2 million in the year-earlier quarter.
JHL Capital Group was the largest stakeholder in MP Materials Corp. (NYSE:MP) in the second quarter, out of 25 hedge funds long the stock. It held 38.2 million shares in the company worth $1.2 billion, out of the total stake value of $3.5 billion.
Bernzott Capital Advisors, an investment management firm, mentioned MP Materials Corp. (NYSE:MP) in its first quarter 2022 investor letter. Here's what the firm said:
“MP Materials (NYSE:MP): This rare earth specialty materials company reported solid earnings driven by higher production and selling prices of neodymium-praseodymium (NdPr), a vital component for the development of magnets used in EV production, wind turbines, drones, robotics, and other industrial applications. Also contributing were offtake agreements with General Motors for magnets and expansion plans for domestic production of magnets making MP the only domestic producer. The balance sheet and cash flow generation remain strong, supportive of expansion plans in the current NdPr pricing environment.”
Number of Hedge Fund Holders: 26
Rio Tinto Group (NYSE:RIO) is another diversified metals and mining company on our list, working to explore, mine, and process mineral resources across the globe. The company offers aluminum, copper, diamonds, gold, borates, titanium dioxide, salt, iron ore, and lithium. It is based in London, United Kingdom.
Liam Fitzpatrick has a Hold rating on shares of Rio Tinto Group (NYSE:RIO) as of October 5.
Rio Tinto Group's (NYSE:RIO) has a dividend yield of 12.48% as of October 19. The company's dividend also has a five-year compound annual growth rate of 23.65%. This October, Rio Tinto Group (NYSE:RIO) announced a new partnership with Voltalia, an international energy company, to receive renewable solar power for its titanium-producer Richards Bay Minerals.
In total, there were 26 hedge funds long Rio Tinto Group (NYSE:RIO) in the second quarter, compared to 22 hedge funds in the previous quarter. Their total stake values were $2.5 billion and $1.8 billion, respectively.
Number of Hedge Fund Holders: 28
Wheaton Precious Metals Corp. (NYSE:WPM) sells precious metals in Canada and across the globe. The company sells gold, silver, palladium, and cobalt deposits, and owns a portfolio of interests in 23 operating mines and 13 development projects. It is based in Vancouver, Canada.
An Outperform rating was reiterated on shares of Wheaton Precious Metals Corp. (NYSE:WPM) on October 13, by analyst John Sclodnick at National Bank.
On September 12, Wheaton Precious Metals Corp. (NYSE:WPM) gained 2.3% in pre-market trading in light of a Buy rating being placed on the stock by Goldman Sachs. Over the next three to five years, the company's EPS is expected to rise by 5%. Wheaton Precious Metals Corp. (NYSE:WPM) also brought in revenue of $302.82 million and EPS of $0.33 in the second quarter, both beating estimates by $6.67 million and $0.01, respectively.
Out of 895 hedge funds tracked in the second quarter, 28 hedge funds were long Wheaton Precious Metals Corp. (NYSE:WPM). Their total stake value was $721 million. Of these funds, First Eagle Investment Management was the largest stakeholder in the company, holding 17 million shares worth $613 million.
Wheaton Precious Metals Corp. (NYSE:WPM), like Rio Tinto Group (NYSE:RIO), Wheaton Precious Metals Corp. (NYSE:WPM), and Steel Dynamics, Inc. (NASDAQ:STLD), is a highly attractive metal stocks many institutional investors are buying today.
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Disclosure: None 11 Best Metal Stocks to Invest In is originally published on Insider Monkey.
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