Tech stocks have been having a field day this year, with the Nasdaq skyrocketing by +42% in 2023. While this may be an adrenaline rush for investors, it’s crucial not to overlook the value of diversification in the portfolio. At the moment, a few basic materials stocks are standing out, offering significant potential for growth and returns.
This week, three basic materials stocks have been added to the Zacks Rank #1 (Strong Buy) list. Let’s explore why investors shouldn’t turn a blind eye to these potential gems.
Centrus Energy
Centrus Energy’s stock has been a real game-changer, soaring by +65% this year. The company serves as a supplier of enriched uranium fuel for commercial nuclear power plants as well as providing contract work services for the U.S. Department of Energy and its contractors. What’s more, despite its impressive rally, Centrus’ stock still trades at a reasonable 20.1X forward earnings multiple.
The cherry on top is the significant rise in annual earnings estimates for fiscal 2023, which have shot up by 30% over the last 60 days. The buzz doesn’t stop there – estimates for fiscal year 2024 are also up by 6%. Not to mention, Centrus most recently knocked it out of the park by surpassing its third-quarter earnings expectations in November, with earnings coming in at $0.52 per share compared to estimates of $0.26 a share.
Ryerson
Ryerson Holding Corporation, a steel producer and metal distributor, has seen its stock rise by a modest +8% in 2023. However, digging deeper reveals deep value that suggests potential for more upside. The company purchases, processes, and distributes various forms of stainless steel, aluminum, carbon, alloy steel, nickel, and red metals, making it a key player in the industry.
Trading at a very reasonable 9X forward earnings multiple, Ryerson’s FY23 earnings estimates have jumped by 18% over the last 60 days, with FY24 EPS estimates up by 5%. Additionally, the company offers a generous 2.28% dividend yield, which it has increased nine times in the last five years, surpassing both the Zacks Steel-Producers Industry average of 1.99% and the S&P 500’s 1.39%.
Sylvamo
Finally, paper producer Sylvamo Corporation’s stock is a hidden gem, with annual earnings estimates for fiscal 2023 surging by 5% over the last 60 days. Moreover, FY24 EPS estimates have risen by 6%, indicating promise for the future. Sylvamo has a unique niche in transforming renewable resources into papers for education, communication, and entertainment, and its stock trades at just 7.5X forward earnings, making it a compelling investment.
To add to the appeal, the company has a global footprint, including mills in North America, Europe, and Latin America. Not to be overlooked is Sylvamo’s very respectable 2.56% annual dividend yield, which is below its industry average of 4.52% but comfortably tops the S&P 500’s average.
Takeaway
Positive earnings estimate revisions have made these basic materials stocks more attractive due to their reasonable P/E valuations. This holds promise for the potential upside in Centrus Energy, Ryerson, and Sylvamo’s stock, especially as market sentiment remains positive.
Zacks Naming Top 10 Stocks for 2024
Want to be tipped off early to our 10 top picks for the entirety of 2024?
History suggests their performance could be sensational.
From 2012 through November, 2023, the Zacks Top 10 Stocks gained +974.1%, nearly tripling the S&P 500’s +340.1%. Now the hunt is on to handpick the best 10 tickers to buy and hold in 2024. Don’t miss your chance to get in on these stocks when they’re announced on January 2.
Be First to New Top 10 Stocks >>
Ryerson Holding Corporation (RYI) : Free Stock Analysis Report
Centrus Energy Corp. (LEU) : Free Stock Analysis Report
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
