The dollar’s strength or weakness has an effect on the prices of various commodities. A weaker dollar usually sees oil and gold prices rise since a low dollar increases the value of other currencies. Since gold is priced in dollars, it takes more dollars to buy the gold, or oil.
When you see the rising prices of commodities sometimes this can be a key factor, rather than a demand-based argument, where gold or oil prices are rising because there is more demand.
Also bear in mind that when the dollar falls, it says something about the weakness of the U.S. economy versus its peers. That also adds to downward pressure on the dollar and effects the price of the commodities as well.
Here, I explore some of the top materials companies out there right now. They have taken advantage of their particular markets and through their experience and unique positioning have built strong competitive moats, which is paying off for each now and into the future.
These six materials stocks in particular are outperforming the pack:
- Forterra (NASDAQ:FRTA)
- Silvercorp Metals (NYSEAMERICAN:SVM)
- Wheaton Precious Metals (NYSE:WPM)
- Trex Co (NYSE:TREX)
- Turquoise Hill Resources (NYSE:TRQ)
- Hecla Mining (NYSE:HL)
Materials Stocks: Forterra (FRTA)
As I mentioned, some of the companies here have unique niches, and FRTA is a shining example. Since 1899, this firm has built pipes for water management systems. You may not think of water management systems as a big deal, but almost every neighborhood and highway system have them.
They protect property from stormwater issues as well as move wastewater safely out of areas. They are as fundamental as the walls of buildings and the asphalt on the roads.
And FRTA is one of the oldest and biggest firms in this market. What’s more, it’s a winner in the environmental, social, governance (ESG) movement that is growing on Wall Street. Its products are sustainably built, and they help keep the environment as undisturbed as possible while allowing businesses and families to grow.
It’s a small cap stock — around a $880 million market cap — but it has been a significant performer this past 12 months, up 91%. But it has plenty of life left in it.
Silvercorp Metals (SVM)
Looking for a China play that hasn’t been swamped by North American investors? SVM’s stock may be the ticket.
While it has silver-lead-zinc and gold-silver-lead mines in China, the company is headquartered in Vancouver, Canada. Canada is home to many mining companies, some of that expertise is at work on the Chinese mines.
Rui Feng founded SVM in 1991, so it has been around a while and with Chinese roots, it becomes a strategic investment for the Chinese government. That means you don’t have political worries you might have from a non-Chinese firm. And a supportive government is an important asset in the mining business.
Also, since the mines aren’t specifically precious metals mines — lead and zinc and even silver are industrial metals — it gives SVM a broader operational base. And good relations with local and regional Chinese governments helps with permitting.
SVM stock is up 92% in the past year due to rising precious metals prices, but the industrial metals form a solid operational backstop.
Wheaton Precious Metals (WPM)
This is another Canada-based firm, but it has a unique take on the precious metals sector. It isn’t a miner. Essentially, it contracts with mines around the world to buy some of all their production in gold, silver, cobalt, palladium and other metals.
That means, other than the money it puts down for a stake in the production streams, it doesn’t have operations or exploration costs of a typical mine. And it provides a service to miners since it allows for some visibility on sales of their production.
It’s a unique model, but it allows WPM to offer a dividend and at a $21 billion market cap it has a good-sized footprint in the sector.
Currently, the stock has a decent 0.83% dividend and has returned 83% in the past year. Any economic bumps will send this stock higher.
Trex Co (TREX)
If you’re fortunate enough to live beyond the wildfires in the West and the hurricanes in the Gulf of Mexico, it’s a nice time of year. And that means sitting outdoors, especially during the novel coronavirus pandemic.
And this isn’t just true of homeowners, but also restaurants and bars are now looking for ways to bring back customers in a socially distanced way. That means outdoor dining and drinking.
One direct beneficiary is TREX stock. It makes wood-alternative decking that’s made from recycled materials. This has many advantages, especially for commercial use.
First, the color is built into the deck, so there’s no need for painting and refinishing. Also, it’s very durable, so weather and sunlight aren’t as much as an issue as it is for wood decks. While it’s more expensive than wood, it lasts longer and is as easy to work with as wood.
Second, it’s an ESG company since it uses recycled materials.
Third, with the pandemic keeping people at home, and interest rates low, adding or replacing a deck with Trex is more affordable.
The stock is up 68% in the past year and has more potential growth from here as institutions add it to their ESG portfolios.
Turquoise Hill Resources (TRQ)
When I say, “Outer Mongolia,” do you think, copper mining?
Well, TRQ does. It’s where it has the majority of its copper mining operations.
But aside from copper being a key industrial metal, there are a few other things you may want to know about TRQ’s operation.
It also has some gold mining operations related to the copper mining.
TRQ’s Olu Tolgoi mine has the potential to operate for 100 years from five known mineralized deposits. Peak operations are scheduled for 2025, when it will be the third-largest copper producer in the world.
And in the 2025-2030 window, TRQ is expecting to produce 55,0000 tons of copper and 45,0000 ounces of gold per year.
But that’s five years in the future. But those are some strong numbers. This is a risky pick but with a $1.5 billion market cap, it has a decent sized operation.
The stock is up 65% in the past year and it could see a big move if it hits its numbers in coming quarters.
Hecla Mining (HL)
At 129 years old, this gold and silver miner has been through its share of booms and busts. It was there when FDR confiscated gold and the dollar went off the gold standard. It has been through a few things.
And that means, it is well hedged and prepared for anything.
Since zinc and lead are usually complementary metals to gold and silver mining, it has an established source of income from these industrial metals, which helps offset the vagaries in precious metals markets.
Having been in the business a long time, it has chosen its mines so that it can mine for the long term and remain productive, without dealing with high operational or exploration costs.
Also remember that gold and silver prices tend to move in tandem in the intermediate term, so rising prices will be good for both metals. And miners usually see leveraged gains when metal prices rise.
HL has a solid $2.7 billion market cap and it’s up a whopping 180% in the past 12 months, but there’s still plenty of headroom for the stock.
On the date of publication, Louis Navellier had a long position in TREX. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article.
The InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.
Louis Navellier had an unconventional start, as a grad student who accidentally built a market-beating stock system — with returns rivaling even Warren Buffett. In his latest feat, Louis discovered the “Master Key” to profiting from the biggest tech revolution of this (or any) generation. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.