What are we looking for?
U.S.-listed basic-materials stocks that have strong year-to-date price performance, pay dividends and have low debt.
With fears of a U.S. recession now left behind, investors are pouring into U.S. stocks. The S&P 500 has made up for all of its February losses and now sits basically flat for the year. Over the past month, the U.S. basic materials sector has outperformed all others with a four-week performance of 7.5 per cent. Basic materials is a cyclical industry that depends on a strong economy. Many of these stocks found themselves beaten down when a U.S. recession looked probable but are now springing back, based on an improved economic outlook.
The screen
We will be using Recognia Strategy Builder to search for medium- and large-cap U.S. basic-materials stocks that meet the following search criteria.
We begin by setting a minimum market cap threshold of $2-billion. Next, we will filter based on year-to-date price performance. We will include only stocks whose prices are up by 5 per cent or more this year. To steer away from companies with high levels of debt, we will limit the acceptable debt-to-equity ratio to 1.0 or less.
Lastly, to ensure we are paid to wait while our investments appreciate, we will select only companies with a dividend yield of 0.5 per cent or greater.
More about Recognia
Recognia is a global leader in automated quantitative analysis and engagement solutions for retail online brokers and institutions. Recognia's product suite provides actionable trading ideas based on technical and fundamental research covering stocks, ETFs, indexes, forex, options and commodities.
What did we find?
Nucor Corp. is North America's largest producer of steel and is headquartered in Charlotte, N.C. The company has the highest market cap on our list at $15-billion and also the highest dividend yield at 3.1 per cent. Up almost 20 per cent year-to-date, the stock has been on an uptrend since hitting a 52-week low on Jan. 25.
Steel Dynamics Inc. has the highest price performance on our list – up more than 27 per cent year to date. On March 16, the company announced good news: It raised its first-quarter earnings expectations from 19 cents a share to a range of between 22 cents and 26 cents. The company also raised its quarterly dividend. The stock responded by moving more than 10 per cent higher since the announcement.
Martin Marietta Materials is a supplier of heavy building materials. On Feb. 9, the company announced fourth-quarter results that missed analyst estimates on both revenue and earnings. The stock shrugged off this news and moved higher, jumping more than 20 per cent in the weeks following the announcement. The stock is now up 13.4 per cent year-to-date.
The investment ideas presented here are for information only. They do not constitute advice or a recommendation by Recognia Inc. in respect of the investment in financial instruments. Investors should conduct further research before investing.
Peter Ashton is vice-president of retail and self-directed investing at Recognia Inc.