Top Materials Stocks for May 2023

Cemex, Albermarle, and Patriot Battery lead for value, growth, and momentum, respectively

John Moore / Getty Images

Top materials stocks this month include Patriot Battery Metals Inc. (PMETF), Sigma Lithium Corp. (SGML), and NGEx Minerals Ltd. (NGXXF), the share prices of which have each more than doubled in the last year.

Materials stocks have underperformed the broader market in the past year amid volatile commodities prices. The benchmark Materials Select Sector SPDR Fund (XLB) fell 3% over the past 12 months, while the Russell 1000 Index rose by 4%.

Here are the top three materials stocks with the best value, the fastest growth, and the most momentum. All data in the tables below are as of May 11.

These are the materials stocks with the lowest 12-month trailing price-to-earnings (P/E) ratio. Because profits can be returned to shareholders in the form of dividends and buybacks, a low P/E ratio shows that you're paying less for each dollar of profit generated.

Source: YCharts

These are the top materials stocks as ranked by a growth model that scores companies based on a 50/50 weighting of their most recent quarterly year-over-year (YOY) percentage revenue growth and most recent quarterly YOY earnings-per-share (EPS) growth.

Both sales and earnings are critical factors in the success of a company. Therefore, ranking companies by only one growth metric makes a ranking susceptible to the accounting anomalies of that quarter (such as changes in tax law or restructuring costs) that may make one figure or the other unrepresentative of the business in general. Companies with quarterly EPS or revenue growth of more than 1,000% were excluded as outliers.

Source: YCharts

These are the materials stocks that had the highest total return over the past 12 months.

Source: YCharts

Core Demand: Materials are the foundations of the global economy, required to build everything from microchips and luxury cars to lightbulbs and toilet paper. While the prices of certain materials rise and fall with supply and demand, companies in this sector enjoy a degree of demand stability that sectors like consumer discretionary, tech, and communications do not.

Portfolio Hedge: Materials companies that mine for precious metals, such as gold and silver, provide investors with a partial hedge against cyclical holdings in their portfolio, often outperforming during market downturns. During times of economic instability with higher inflation and interest rates, materials companies withstand difficulties with solid dividend growth and healthy cash flows.

Rising Costs: Materials companies face periods of rising costs that can crimp earnings, especially if they coincide with falling commodity prices. Mining and developing resources is capital intensive. Supply chain disruptions, rising fuel costs, and machinery maintenance can cause significant challenges, particularly during periods of spiking inflation. For example, pandemic-related shipping snarls in 2021 saw the benchmark price to ship copper in the U.S. reach its highest level since 2003.

Industrial Action: Certain industries within the material sector, such as mining, are heavily unionized, increasing the risk of industrial action that can temporarily suspend or reduce operations. A reduction in output has the potential to impact a mining company's earnings which can put downward pressure on its share price. In 2021, iron-ore mining giant Rio Tinto Group (RIO) had to reduce one of its mines to 25% capacity for several months due to strike action, which union officials claimed cost the company around $5 million daily.

ABC News. "U.S. 'concerned' by Mexican Seizure of Alabama Company's Port."

Ferroglobe PLC. "Ferroglobe Reports First Quarter 2023 Financial Results."

Albemarle Corp. "Albemarle Corporation Announces Dividend."

Albemarle Corp. "Albemarle Reports Net Sales Increase of 129% for the First Quarter 2023."

Martin Marietta Materials Inc. "Martin Marietta Reports Quarterly Cash Dividend."

Martin Marietta. "Martin Marietta Reports First-Quarter 2023 Results."

NGEx Minerals Ltd. "NGEx Minerals Reports New Discovery at Potro Cliffs - Drills 60m at 7.52% CuEq including 10m at 18.00% CuEq."

Mining.com. "Americans Face Record Metals Prices as Shipping Costs Surge."

Mining Magazine. "Rio Tinto Makes Deal to End Two-Month Strike at Kitimat."