5 Buy-Ranked Basic Materials Stocks Flying High This Month
Zacks Investment Research | Sep 23, 2020 07:31AM ET
Wall Street is reeling under severe volatility in September after an astonishing bull run in the last five months. Although the recent downtrend of the stock market is broad-based, one sector, basic materials, has been able to withstand market turmoil in September so far. A handful of these stocks with a favorable Zacks Rank are trading in the green this month.
Basic Materials Sector Rebounds /h3
The basic materials sector comprises companies involved in the discovery, development, and processing of raw materials used in manufacturing and construction including steel, aluminum, chemicals and forestry products. Consequently, these stocks are sensitive to business cycle and are likely to thrive when the economy is strong.
The Materials Select Sector SPDR (XLB), one of the 11 broad sectors of the benchmark S&P 500 Index, has gained 1% so far in September. All other sectors have lost in the said time frame. Notably, the S&P 500 Index itself has tumbled 5.2% month to date.
At its current level of 63.33, XLB is well above the 50-day and 200-day moving averages of 62.77 and 56.76, respectively. The 50-day and 200-day moving averages are important technical barriers providing short-term and long-term support levels. It is widely recognized in the technical analysis space that whenever the 50-day moving average line surges ahead of the 200-day moving average line, a long-term uptrend for the sector becomes a strong possibility.
On Sep 16, XLB recorded its all-time high of 67.14. It has gained 3.1% year to date while the benchmark S&P 500 itself rose just 2.6% in the said time frame. Notably, materials is the fourth-best performing sector of the S&P 500 Index after technology, consumer discretionary and communication services, year to date.
Our Top Picks/h3
We have narrowed down our search to five basic materials stocks that have witnessed robust earnings estimate revisions for 2020 within the past 60 days and are in the positive territory so far in September. This indicates strong business potential for these companies for the rest of this year. Each of these picks carries a Zacks Rank #2 (Buy). You can seeZacks Investment Research
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