We recently published a list of 10 Best Materials Stocks to Buy Right Now. In this article, we are going to take a look at where Vale S.A. (NYSE:VALE) stands against other best materials stocks.
As the uncertainty about the US Presidential election faded, market experts are now looking for the sectors expected to benefit from the re-election of President Trump. Donald Trump’s policies on housing, targeting federal lands and reducing regulatory barriers, demonstrate ambitious plans to fuel construction and housing availability, reported Fastmarkets.
Trump’s stance on immigration might also impact the pallet sector. A fall in immigration and expected deportations might result in a tightening of the labor market and wage pressures. Therefore, Fastmarkets reported that there might be a reacceleration in wage growth. That being said, huge deportations might be restricted as business leaders can oppose these regulations due to expectations of labor shortages and higher costs. Therefore, any policy changes might be moderated.
BofA Remains Optimistic on Materials Sector- Here’s Why
Strategists at Bank of America are optimistic about the materials sector. This optimism stems from the expectation of an earnings rebound after the US Fed’s rate-cutting cycle in September. The strategists also pointed out significant underinvestment in manufacturing, including fields such as mining and equipment replacement. They believe that robust decarbonization goals are expected to aid metals, mining, and commodities.
The large bank also cited China’s stimulus program, highlighting that the materials sector had the highest correlation when it comes to the S&P 500’s 11 sectors to the MSCI China Index. Moreover, Wall Street experts opine that the return of Trump’s Presidency is expected to fuel growth momentum for construction, infrastructure, domestic manufacturing, and industrial sectors.
Montgomery Investment Management believes that Trump’s focus on rebuilding America’s infrastructure should result in elevated government spending, which should aid construction companies and materials suppliers. Also, policies that target bringing manufacturing jobs back to the U.S., such as tariffs on imported goods, should support domestic manufacturing companies.
READ ALSO: 7 Best Stocks to Buy For Long-Term and 8 Cheap Jim Cramer Stocks to Invest In.
US Construction Industry Has a Favourable Outlook
As per JLL, the US construction industry is well-placed for a year of measured growth and adaptation in 2025. The company believes that the push for green building practices from local governments and client directives, together with energy efficiency and lower carbon footprints, should continue to shape project requirements.
Also, improvements in the integration of advanced technologies including AI, IoT, and digital twins have been reshaping design, construction, and building management. This should provide opportunities for increased efficiency and value. JLL added that the US construction industry appears to be well-placed for growth and maintaining the right balance between short-term operational efficiency with long-term goals, while adapting to evolving organizational needs and technological advancements, remains crucial.
A businessman checking a graph, indicating the steady growth of his specialty finance company.
Our Methodology
To list the 10 Best Materials Stocks to Buy Right Now, we used a screener and sifted through several online rankings to extract the companies operating in the materials sector. Finally, the stocks were arranged in the ascending order of their average upside potential, as of November 14.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Vale S.A. (NYSE:VALE)
Average Upside Potential: 47.5%
Vale S.A. (NYSE:VALE) is engaged in producing and selling iron ore, iron ore pellets, nickel, and copper in Brazil and internationally.
Vale S.A. (NYSE:VALE) continues to implement a Value-Based Management (VBM) approach in a bid to optimize its operations and enhance shareholder value. The VBM vision demonstrates potential benefits to production and unit costs extending into 2028 and beyond. Wall Street analysts believe that such improvements should increase Vale S.A. (NYSE:VALE)’s net present value. The company’s strategic vision for 2030 focuses on a performance-driven culture, premium product portfolio, and stakeholder trust. Precisely, the company’s long-term growth should stem from cost optimization.
Vale S.A. (NYSE:VALE)’s management remains optimistic about its cost efficiency, targeting to reach sub-$20 cash costs by 2026, and it remains confident in the long-term potential of the nickel sector. It also plans to increase iron ore capacity to 350 million tons and further enhance copper production. Industry experts believe that Vale S.A. (NYSE:VALE) remains well-positioned to capitalize on any improvements in iron ore prices or higher global demand.
This means that elevated production volumes should result in economies of scale, potentially reducing per-unit costs and improving overall profitability. During increased demand or supply constraints from other producers, Vale S.A. (NYSE:VALE) can potentially capture a larger market share and benefit from price premiums.
In Q3 2024, the company’s operational and sales performance saw an improvement throughout the business segments. Notably, the iron ore shipments rose by 1.3 Mt (or 2%) YoY, courtesy of an 18% increase in pellet sales because of higher production and strong demand.
As per Wall Street analysts, the shares of Vale S.A. (NYSE:VALE) have an average price target of $15.39.
Overall, VALE ranks 2nd on our list of 10 Best Materials Stocks to Buy Right Now. While we acknowledge the potential of VALE as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for a deeply undervalued AI stock that is more promising than VALE but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.