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4 Undervalued Metals Stocks To Watch

Originally published on Best Stocks

Category: best stocks to buy now

In a bull market, it’s easy to find stocks with big potential. In a bear market, it’s much harder. Investors must dig deeper and analyze companies more carefully to uncover the undiscovered gems in the stock market. A difficult market also means stocks with strong fundamentals become even more valuable. Metals are often considered safe investments during volatile markets because of their insatiable demand and limited supply. Even in bear markets, some metals stocks will remain attractive because of their long-term view on demand. In addition, some undervalued companies offer investors opportunities for significant returns if the economy improves or their business strategies pay off sooner than expected. Read on to discover five undervalued metals stocks worth watching.

Companhia Siderurgica Nacional (SID)

Siderurgica Nacional (SID) is an iron and steel manufacturer based in Brazil. The company operates in an industry sensitive to economic swings, but Siderurgica has several attributes that make it a good investment. Importantly, the company has a significant presence in Brazil’s domestic market. That’s offsetting some of the risk associated with the company’s export-heavy earnings profile. Brazil is also in the process of investing an enormous amount in trying to jump-start its economy. That will lift demand for commodities and iron and steel products. Siderurgica has a track record of executing large projects and a solid balance sheet. That’s compelling when many iron and steel companies are struggling financially. Siderurgica is also trading at fewer than two times its book value. That’s a discount to many of its peers and suggests that investors may overlook the company’s strong fundamentals.

Mechel PAO (MTL)

Mechel PAO is one of the largest steel producers in the world. The company has operations in the Americas, Europe, and Asia. Mechel is also the largest exporter of coal in the Russian market. The company has a long track record of growing earnings. It has also been able to maintain domestic production despite significant geopolitical headwinds. Mechel is currently trading at a discount to book value. The company is also operating under interim management following the death of its founder in 2018. Investors have largely overlooked Mechel because of the company’s proximity to Russia. The country has been the source of significant political risk and sanctions. That makes Mechel’s operations less attractive to investors looking for stable, longer-term earnings.

Worthington Industries (WOR)

Worthington Industries is a diversified industrial company with operations in the U.S. and abroad. The company’s portfolio spans several industries, including metals, chemicals, and building materials. Several of Worthington’s businesses are being acquired, further enhancing the company’s earnings profile. Worthington is also benefiting from the recent weakness in the U.S. dollar. The company generates a significant portion of its sales in foreign currencies. Worthington is also well-positioned to capitalize on trade-related headwinds, given its global scale. Worthington is currently trading at a discount to book value. That’s largely attributable to the company’s strong dividend history. Investors have increasingly shifted their focus away from yield-focused stocks since the Federal Reserve began raising interest rates. Worthington offers a compelling combination of dividend growth and value.

Alamos Gold (AGI)

Alamos Gold is a gold and silver mining company with operations in several countries. The company has been actively acquiring assets but has also been focused on reducing its operational and financial risks. As a result, Alamos is one of the few publicly traded gold mining companies with meaningful silver production. That’s a positive in an industry that’s historically driven by gold. The company is also well-positioned to grow in international markets. The gold market’s headwinds may have led some investors to overlook Alamos. But, the company recently acquired a gold and silver project in Mexico. That will provide Alamos with a significant upside if the Mexican government follows through with plans to reduce import tariffs on gold and silver. Alamos is also growing its production profile. In addition, the company has a growing dividend and a solid balance sheet.

Conclusion

The metals industry is cyclical, but it can be a lucrative investment during strong economic times. Metals companies generally have lower profit margins than other industries, so demand and price are important factors in these stocks’ short- and long-term success. When the economy is struggling, metals are often used for industrial purposes, like building materials and machinery. When the economy grows, these stocks can appreciate as their demand increases. And since these companies often produce raw materials, investors should be aware of the potential for wild fluctuations in commodities prices.

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