Precious metals can lift your portfolio.
Commodities have gotten clobbered this year, pushing not only crude oil, but a number of precious and industrial metals to lower price levels. For bargain-hunting investors looking for diversification, some bullish analysts say now is the time to scoop up value in the metals and mining industry. Here are eight ways to capitalize on what’s expected to be a turnaround for metals and mining.
Nucor Corp. (ticker: NUE)
Nucor Corp. is the largest steel producer in the U.S., and is rated by S&P Capital IQ equity analyst Matthew Miller as a “strong buy,” with a 12-month target at $54 per share. Miller says the worst is over for steel producers, and Nucor’s strong balance sheet and strong cash flows are positives for investors. “For the longer term, we see earnings rising on U.S. economic growth, strong automotive demand, a recovery in U.S. nonresidential steel demand and better control of raw material costs,” Miller says.
Alcoa Inc. (AA)
Alcoa Inc. is a play on the global aluminum industry. In September, Alcoa announced plans to split into two companies to separate mining from the rapidly growing engineered products and solutions business. Miller thinks this move can unlock value, as the products business is 40 percent levered to the growing aerospace industry. S&P Capital IQ rates AA stock as a “buy” with a 12-month target at $15.
United States Steel Corp. (X)
Like Nucor, United States Steel Corp. is a major player in the steel industry. Weaker demand from China has been a headwind, but improving macro fundamentals are expected to support X stock moving forward. “We see earnings increasing on U.S. economic growth, a recovery in U.S. nonresidential construction and increasing demand from the automotive sector,” Miller says. S&P Capital IQ has a “buy” on U.S. Steel, with a 12-month target at $25.
Freeport-McMoRan Inc. (FCX)
If you are tired of steel and aluminum, Freeport-McMoRan Inc. may be the stock for you, as a play on the copper and gold mining industry. FCX stock is trading at the lower end of its 52-week range, as copper prices have tumbled amid weak global demand. FCX could be poised to capitalize on what is projected to be improvement in the copper market in the first half of 2016. Morningstar, the Chicago-based research firm, rates Freeport-McMoRan with three stars and pegs fair value at $13.
Newport Mining Corp. (NEM)
Newmont Mining Corp. is a global gold, silver and copper mining company. Investors often buy gold investments through exchange-traded funds, or gold mining companies as a portfolio diversifier. Gold traditionally is perceived as a safe-haven investment in times of political, military or economic stress, and gold futures have surged 11 percent since July. Morningstar rates Newmont Mining with four stars and pegs fair value at $29.
iShares Silver Trust ETF (SLV)
The iShares Silver Trust ETF offers investors exposure to the price of silver bullion. Often called the poor man’s gold, silver offers diversification to precious metals at a lower price level than its more-expensive cousin. It also benefits from dual demand streams, as it is both an industrial and precious metal. In a research report, Bank of America Merrill Lynch projects the fair value of silver at nearly $18 per ounce.
ETFS Physical Platinum ETF (PPLT)
The ETFS Physical Platinum ETF is designed to give investors exposure to the price of physical platinum. Platinum is both a precious and industrial metal, used for jewelry, catalytic converters, dentistry equipment, electrical contacts and more. While platinum trades at nearly $1,000 an ounce, shares of the PPLT ETF can be had for a tenth of that. Unlike some ETFs, PPLT holds physical platinum bullion, so it’s a play purely on the metal and not on companies that rely on platinum.
PowerShares DB Precious Metals Fund (DBP)
The PowerShares DB Precious Metals Fund is an ETF that tracks changes in the DBIQ Optimum Yield Precious Metals Index Excess Return. Currently, more than half of the fund’s holdings are in cash, with nearly 40 percent of the remainder in gold and 10 percent in silver. This ETF differs from physically backed metals funds that buy and hold gold and silver bullion, as it purchases futures contracts. Investors should consider that movement in underlying futures can be volatile.
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8 Smart Ways to Invest in Metal Stocks originally appeared on usnews.com