XLB - Materials: Seeking Alpha Quant Ratings' top picks heading into earnings

2023-10-12 12:21:22 ET

The S&P 500 Materials sector has underperformed the broader market in the past three months, declining 5.2% compared to a 3.65% fall in the main index, as economic slowdown around the world, especially in China, continued to hammer stock performances in an industry that comprises chemical makers to miners and forest products.

Heading into the third quarter earnings season, Seeking Alpha’s Quant Ratings has a “hold” on the sector with a score of 3.09 on average, and the accompanying Materials Select Sector SPDR Fund ETF ( NYSEARCA: XLB ) is up about 2% year-to-date.

The materials sector is cyclical and dependent on global economic growth, and the fund tends to perform well when prices of materials and commodity prices gain. China, one of the biggest drivers of global economic growth, has been reeling under a real estate crisis, which has weakened global metals demand, and therefore weighed on stock performances.

Looking into individual companies in the sector, out of the 22 stocks, fertilizer manufacturers CF Industries Holdings ( CF ) holds a 3.97 score, Mosaic ( MOS ) has a 3.59 score, and are the only names that have a Quant Rating ‘Buy’, while FMC Corporation ( FMC ) is a ‘strong sell’, and rest ‘Neutral’.

The system awards grades based on quantitative measures, like valuation, earnings growth, and recent stock performance. The highest possible score for any individual company is a 5.

Colorado-based Newmont ( NEM ), the world’s top gold producer’s Quant Rating downgraded to a ‘hold’ from ‘buy’ on Sept. 28, and consequently, its score dropped to 2.87 from 3.53. Gold prices declined in the September-ended quarter as the Federal Reserve struck a hawkish stance.

Albemarle ( ALB ), the world's largest lithium producer, which aims to buy junior Australian rival Liontown Resources in a $4.3 billion deal has a 3.14 rating score. The stock is down 23% YTD.

More on Materials

• Seeking Alpha's quant ratings recommend technology, communication services ahead of Q3 earnings
• XLB Is A Hold Considering Risks Of Global Deflation Led By China
• XLB: Ultimately A Chemicals Play With An Unclear Outlook
• MP, SA and TGB are among materials movers
• Seeking Alpha’s Quant Rating on Materials Select Sector SPDR ETF

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