Investors should stay away from companies continually declining in share price and return just as much as they should be looking to find stocks to invest in for the long term, hoping to see a substantial return eventually. The last thing you want to do is buy into a company that is a sinking ship and will continue to decline. The investor will continue to abandon the company, looking for other opportunities. This has led to the emergence of materials stocks to avoid.
Materials prices have seen a slight decline in overall prices following the pandemic, which saw materials prices surge, which also sent materials stocks higher. Companies within the sector are trying to find ways to remain as profitable as they were during the pandemic.
The three materials stocks I mention below are, in my opinion, ones that won’t offer anything but disappointment, especially in the near term. These companies are all facing a whole host of issues, from consistently declining sales to reduced production output and leadership changes. Investors should just avoid these companies for now until a possible turnaround.
Hecla Mining (HL)
Hecla Mining (NYSE:HL) mines for materials such as gold, silver, and zinc. Headquartered in Coeur d’Alene, Idaho, it has different minie locations in Mexico, Canada, and the U.S.
Year-to-date, its share price has plummeted by 31%. Mainly due to a large collapse amid a fire in their mine located in Idaho, which luckily was in a portion of the mine where no one was located at the time. Hecla also announced that the mine would be shut down for the remainder of this year. This is a significant loss to Hecla’s silver production, which, from January to the end of July, the mine produced 3 million ounces of silver. It is trying to offset this significant drop in production by ramping up the output of its other mines.
On August 8, it reported earnings results for the second quarter, which stated an increase in an overall net loss of 16%, and total revenue declined by 7% compared to the year before. This makes it one of those materials stocks to avoid.
Sealed Air (SEE)
Sealed Air (NYSE:SEE), located in Charlotte, North Carolina, is a producer of a wide range of packaging products for uses such as preserving perishable food products as well as protective packaging used in the shipping process of consumer goods.
Sealed Air’s stocks have fallen by approximately 36% year-to-date due to continued financial struggles and a lower income potential forecast. On August 8, Sealed Air released its second-quarter earnings results.
Net income dropped by 13%, and total sales fell by 3% compared to the second quarter of 2022. Its updated full-year outlook for 2023 stated a decrease in its expected net sales range to between $5.4-$5.6 billion, which was reduced from $5.9-$6.1 previously. Although fluctuations in a company’s earnings and top line are to be expected, when they coincide with a sharp drop in its stock price it may become one of those materials stocks to avoid.
Alcoa (AA)
Alcoa (NYSE:AA) is a large aluminum producer located in Pittsburgh, Pennsylvania. It also mines for bauxite, a key component in producing aluminum metal. Alcoa also operates nearly 30 locations globally.
Over the past year, the stock price for Alcoa has fallen by 25%. And it has retreated 70% from its all-time high at the beginning of 2022. The continual drop in total revenue and production cost of its aluminum products has led to this decline.
On July 19, Alcoa released its earnings results for the second quarter of 2023. It stated a drop in total revenue of 26% compared to the year before. In Q2 2022, it reported a net income of $674 million; in Q2 2023, it became a net loss of $121 million. This was attributed to lower prices for aluminum and higher cost to produce products.
Recently, Alcoa has had a number of major leadership changes, including the appointment of a new Executive Vice President, who will also be Chief Commerical Officer, and a new President and CEO, William Oplinger, which came into effect on September 24.
As of this writing, Noah Bolton did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
