Blame it on China’s declining growth, but the once mighty MSCI World Materials Index has dropped nearly 20% since 2011. For Rick de los Reyes, a portfolio manager at T. Rowe Price, this downturn presents an opportunity as materials stocks are cheap. Be choosy when buying, but these three companies deserve consideration.
BHP Billiton (NYSE: BHP)
Dividend yield: 3.46
This diversified natural resources company can produce its commodities at a lower cost than most, which is key in this environment, de los Reyes says.
Rio Tinto (NYSE: RIO)
Dividend yield: 3.20
Like BHP, it produces several commodities and that’s good for diversification. It’s also expanding its iron ore capacity, which it can mine at low cost.
Carpenter Technology (NYSE: CRS)
Dividend yield: 1.15
This company isn’t a producer, but supplies specialty metals to the aerospace, industrial and automotive industries. “You remove theraw material risk,” says de los Reyes.
*Dividend yield represents the investor’s percentage return on investment at its prevailing market price.