Concerned About Inflation? Consider Adding These 3 Basic Materials Stocks to Your Portfolio – June 30, 2021
Inflation is considered one of the major risks to investors at the moment because it could result in the Fed tightening policy and eat into consumer spending. However, certain types of companies do very well when inflationary pressures are increasing, as they can pass on rising prices to their customers. Among this group, basic material and chemical stocks such as Dow Inc. (DOW), Linde PLC (LIN), and Rio Tinto (RIO) appear to be solid plays. Further, they are quite attractive from a valuation basis which means there is more potential upside.
Dow Inc. (DOW)
DOW, a material science business, provides sustainable basic materials. The company raked in nearly $39 billion in cash last year alone. DOW materials are used for products and solutions in everything from infrastructure to packaging and consumer care products.
DOW has a forward P/E ratio of just under 9, meaning it will probably hold steady should the market significantly undulate. DOW has a beta of 1.74, so it probably won’t take investors for a roller coaster ride if the market jumps or slides.
DOW is a POWR Ratings success with an overarching B rating indicating it is a Buy. DOW has Bs in the Value, Sentiment, and Growth components of the POWR Ratings.
DOW is ranked 20th of nearly 100 stocks in the Chemicals segment.
If the top analysts are right, DOW will reach the average target price of $66.86, ultimately spiking by just under 6%. The lowest target price for the stock is $44. The highest target price for DOW is $80. DOW’s average analyst target price has increased more than $28 across the prior 12 months.
Linde PLC (LIN)
Headquartered in Guildford, LIN is the top producer of industrial gases used in all sorts of industries including healthcare, electronics, manufacturing, food & beverage, and chemicals & refining. In short, LIN makes the world that much more productive in several regards. As an example, LIN’s oxygen is used to provide hospitalized patients with life support.
LIN has a forward P/E ratio of 28.72 indicating it might be slightly overvalued at $290 per share. The stock’s 52-week high is $305.71. LIN’s 52-week low is $209.45. LIN has a beta of 0.78 so it won’t undulate much should the market fluctuate.
LIN has a B POWR Rating indicating it is a Buy. The stock has an A Momentum component grade along with Bs in the Quality, Sentiment, Growth, and Stability components.
Of the 99 stocks in the Chemicals segment, LIN is ranked 32nd.
The analysts are bullish on LIN, setting an average target price of $329.25 for the stock. If LIN hits this target price, it will have popped by more than 15%. Exactly 23 analysts have issued LIN recommendations. Five of the analysts view the stock as a Strong Buy, 14 view it as a Buy and four view it as a Hold.
Rio Tinto (RIO)
RIO, a global mining business, mines aluminum, zinc, diamonds, zircon, uranium, tin, lead, and silver. The company’s mining operations take place in Europe, Canada, South Africa, Australia, and New Zealand.
There is a good argument to be made that RIO is underpriced at $84.45 as the stock’s forward P/E ratio is a mere 5.38. RIO is currently priced about $10 below its 52-week high of $95.97. RIO is also intriguing as it appears to be a relatively safe stock. RIO’s beta is 0.61.
RIO has a B POWR Rating grade. The stock has Bs in the Value and Stability components of the POWR Ratings. RIO has C grades in the Sentiment and Growth components of the POWR Ratings.
RIO is ranked fifth of 41 stocks in the Industrial – Metals category.
RIO shares were trading at $83.60 per share on Wednesday morning, down $1.01 (-1.19%). Year-to-date, RIO has gained 16.29%, versus a 15.23% rise in the benchmark S&P 500 index during the same period.
Author: Patrick Ryan