In this piece, we will take a look at the 12 best metals stocks to invest in. If you want to skip our introduction to the metals industry and the determinants of its performance, then you can skip ahead to 5 Best Metals Stocks To Invest In.
The metal industry is the backbone of the global economy. And conversely, the global economy is also a key determinant of the industry's performance. This is because the biggest users of metals are industries, which rely on them to build heavy duty industrial products such as jet engines, excavators, and crawlers. Industries are joined by the construction industry which is one of the biggest users of steel in the world. While steel is not directly a metal, it relies on iron since the material is actually a compound that mixes carbon and iron to increase durability and strength.
Naturally, metal stocks fluctuate with global investor sentiment about the economy. Robust economic output means that there is more construction and greater industrial activity which leads to greater demand for metals and more revenue for the firms. In 2023, the key question on metal investors' minds is the outlook for China. China is one of the biggest infrastructure spenders in the world, and its Belt and Road initiative is a maze of roads that seeks to connect countries together and help maintain Chinese industrial output. This year, the metal industry has slowed down due to turmoil in the Chinese construction sector. Data shows that the Chinese property segment accounts for a whopping 20% of global steel demand, 18% of aluminum demand, and 6% of copper demand.
Yet, the Chinese construction industry's effects on the metal industry aren't the first disruption that the sector has faced over the recent months. In fact, the 2022 Russian invasion of Ukraine also had a negative effect on the sector. An uptick in demand for metals and materials such as nickel and steel created disruption in the market and made metals prices, as measured by the World Bank’s Metals and Minerals Price Index, rise by 13% during the first quarter of 2022. On an individual basis, prices of iron ore, aluminum, nickel, tin, and zinc rose by 27%, 18%, 35%, 12%, and 11% respectively on an annual basis in March 2022.
The metals sector is not only important for today's industries but also for industries of the future. This is primarily due to the importance of one of the softest and most volatile metals you're likely to find, lithium, and its criticality to the electric vehicle industry. As you're likely to know, lithium is essential for battery production due to its electro-chemical properties. This demand implies that global lithium demand could grow by as much as ten times between 2021 and 2030 according to estimates from the consulting firm McKinsey. It believes that global lithium carbonate demand can grow from 500 thousand metric tons in 2021 to 5 million metric tons by 2030, and lithium companies will have to utilize innovative manufacturing technologies to ensure that they are able to meet demand. If you're interested in learning more about the global lithium industry and the countries that can dominate it in the future, then you can read Lithium Reserves by Country: Top 15 Countries.
Additionally, while lithium is often considered to be the most important metal for the global shift to renewable energy, the reality is that without iron the world might find it difficult to reduce its reliance on polluting energy. Iron is important for the renewable energy sector since it is used to make steel, and we've explained this in detail as part of our 10 Metals Stocks with Insider Buying coverage. If you're wondering about the top three stocks in this list, then these are Paramount Gold Nevada Corp. (NYSE:PZG), Trilogy Metals Inc. (NYSE:TMQ), and TMC the metals company Inc. (NASDAQ:TMC).
Shifting gears, another metal that has been in the spotlight ever since the U.S. dollar started to appreciate in the wake of the Federal Reserve's rapid interest rate is gold. Gold is a multi purpose metal that is used in electronics manufacturing, decoration, and finance. Gold prices rise if investors expect interest rates to come down since the dollar drops, and vice versa.
As for the outlook for gold, here's what the management of Wheaton Precious Metals Corp. (NYSE:WPM) had to say during the firm's second quarter of 2023 earnings call:
Strong commodity prices, coupled with our solid production base, resulted in revenue of $265 million and a gross margin of $152 million. Of this revenue, 56% was attributable to gold, 41% to silver, 2% to palladium, and 1% to cobalt. As at June 30, 2023, approximately 103,000 GEOs were in PBND and cobalt inventory, representing approximately 2.1 months of payable production, which is a level that is consistent with the preceding four quarters. G&A expenses amounted to $10 million for the second quarter, and the company anticipates that G&A will amount to $40 to $43 million for the year. Adjusted net earnings amounted to $143 million, a $7 million decrease relative to the second quarter of 2022. It is worth noting, though, that when comparing the results to the prior year, the estimated impact to net earnings associated with the relative changes in PBND was $18 million, meaning we would have exceeded prior year’s net earnings if not for the timing of deliveries.
So, with the third quarter earnings season for the metal industry nearly with us, we decided to take a look at the top metal stocks to buy with the top three picks being Freeport-McMoRan Inc. (NYSE:FCX), Teck Resources Limited (NYSE:TECK), and Newmont Corporation (NYSE:NEM).
12 Best Metal Stocks To Invest In
A close-up of a modern semiconductor chip, intricately wired and gold plated. Editorial photo for a financial news article. 8k. --ar 16:9
Our Methodology
To compile our list of the best metal stocks to buy, we first made a list of the 47 biggest aluminum, copper, gold, silver, lithium, and other industrial and precious metals stocks by their market capitalization. Then, those with the greatest number of hedge fund investors as of Q2 2023 were selected as the best metal stocks to buy.
Constellium SE (NYSE:CSTM) is an industrial products company that sells aluminum to aerospace, transportation, and other users. The firm has been dealing with a slowing global economy as of late since its revenue for the first nine months of 2023 has dropped by 10% annually and is accompanied by a 5% shipments drop.
During 2023's June quarter, 27 out of the 910 hedge funds part of Insider Monkey's research had invested in Constellium SE (NYSE:CSTM). Jared Nussbaum's Nut Tree Capital is the firm's biggest shareholder in our database since it owns a $68 million stake that comes via 4 million shares.
Along with Teck Resources Limited (NYSE:TECK), Freeport-McMoRan Inc. (NYSE:FCX), and Newmont Corporation (NYSE:NEM), Constellium SE (NYSE:CSTM) is a top metal stock to invest in according to hedge fund sentiment.
Rio Tinto Group (NYSE:RIO) is one of the biggest diversified mining companies in the world. The firm is currently transforming its operations in Australia by building autonomous trains to carry its products. The shares are rated Strong Buy on average and the average share price target is $83.17.
Insider Monkey scoured through 910 hedge fund holdings for this year's second quarter and found that 29 had bought the firm's shares. Rio Tinto Group (NYSE:RIO)'s largest hedge fund investor is Ken Fisher's Fisher Asset Management through its $950 million investment.
Hudbay Minerals Inc. (NYSE:HBM) is a pure play metals miner that focuses its attention on extracting copper concentrates. Despite the fact that the firm has not beaten analyst EPS estimates since Q3 2022, its shares are still rated Strong Buy on average and analysts have priced in a $2.96 share price upside over the current share price of $4.30.
29 hedge funds among the 910 tracked by Insider Monkey were Hudbay Minerals Inc. (NYSE:HBM)'s investors as of June 2023 end. Thomas E. Claugus's GMT Capital is the biggest stakeholder, owning 34.3 million shares that are worth $164 million.
Vale S.A. (NYSE:VALE) is another diversified mining giant. It produces a wide variety of metals such as iron, gold, silver, and nickel. The firm was out with some disappointing news for investors in October 2023, as it shared that disruption in a Brazilian mine led to a 3.9% third quarter output decline.
For their shareholders during 2023's second quarter, 30 out of the 910 hedge funds polled by Insider Monkey had held a stake in the firm. Vale S.A. (NYSE:VALE)'s largest stakeholder among these is Ken Fisher's Fisher Asset Management since it owns $242 million worth of shares.
Livent Corporation (NYSE:LTHM) is a chemical company that sells lithium for battery production. It is one of the biggest lithium producers in the industry, and the firm aims to grow its sales volume by 20% next year in order to keep up with competitors.
Insider Monkey's second quarter of 2023 survey covering 910 hedge funds revealed that 31 funds were Livent Corporation (NYSE:LTHM)'s investors. Ken Griffin's Citadel Investment Group is the firm's biggest hedge fund investor courtesy of its $59.7 million stake.
Barrick Gold Corporation (NYSE:GOLD) is one of the biggest gold mining companies in the world. These days, it is seeking to grow its presence in the developing world, and has placed its bets on a mining project in Pakistan with the aim to start production a couple of years from now.
As of June 2023 end, 31 out of the 910 hedge funds tracked by Insider Monkey had bought the firm's shares. Barrick Gold Corporation (NYSE:GOLD)'s largest investor in our list of hedge funds is Jean-Marie Eveillard's First Eagle Investment Management through its $715 million investment.
Alcoa Corporation (NYSE:AA) is an aluminum mining company headquartered in Pittsburgh, Pennsylvania. Its third quarter of 2023 earnings were a disappointing bunch since the firm saw lower prices led to an annual revenue drop and overall, the firm missed analyst EPS estimates.
34 out of the 910 hedge funds part of Insider Monkey's Q2 2023 database had held a stake in Alcoa Corporation (NYSE:AA). Out of these, the biggest shareholder is Patrick Degorce's Theleme Partners as it owns 4.2 million shares that are worth $144 million.
Freeport-McMoRan Inc. (NYSE:FCX), Alcoa Corporation (NYSE:AA), Teck Resources Limited (NYSE:TECK), and Newmont Corporation (NYSE:NEM) are some top hedge fund metal stocks.
