Looking to gain exposure to commodities? One way is through basic materials stocks, although it's important to keep in mind that these stocks are also subject to company risks separate from the prices of their underlying commodities.
We began by screening the basic materials sector for stocks that appear to be undervalued relative to earnings growth, with PEG below 1.
We then screened for those with bullish sentiment from institutional buying, with net positive purchases in the quarter representing at least 5% of share float. This indicates "smart money" investors are bullish on these names' prospects.
For an interactive version of this chart, click on the image below. Average analyst ratings sourced from Zacks Investment Research.
Do you think these stocks should be trading higher? Use this list as a starting point for your own analysis.
1. Peabody Energy Corp. (BTU): Engages in the exploration, mining, and production of coal. Market cap at $6.52B, most recent closing price at $24.29. PEG at 0.55. Net institutional purchases in the current quarter at 22.5M shares, which represents about 8.42% of the company's float of 267.26M shares.
2. Cliffs Natural Resources Inc. (NYSE:CLF): Produces iron ore pellets, lump and fines iron ore, and metallurgical coal products. Market cap at $4.28B, most recent closing price at $30.01. PEG at 0.56. Net institutional purchases in the current quarter at 12.2M shares, which represents about 8.64% of the company's float of 141.27M shares.
3. Calumet Specialty Products Partners LP (NASDAQ:CLMT): Produces and sells specialty hydrocarbon products in North America. Market cap at $1.77B, most recent closing price at $30.70. PEG at 0.55. Net institutional purchases in the current quarter at 2.3M shares, which represents about 6.07% of the company's float of 37.87M shares.
4. Precision Drilling Corporation (NYSE:PDS): Provides onshore well drilling services, completion and workover services, and ancillary services to the oil and gas industry in North America and internationally. Market cap at $1.93B, most recent closing price at $6.97. PEG at 0.43. Net institutional purchases in the current quarter at 13.8M shares, which represents about 5.02% of the company's float of 275.06M shares.
5. Rosetta Resources, Inc. (NASDAQ:ROSE): Engages in the exploration, development, production, and acquisition of onshore oil and gas resources in the United States. Market cap at $2.42B, most recent closing price at $46.06. PEG at 0.73. Net institutional purchases in the current quarter at 2.7M shares, which represents about 5.26% of the company's float of 51.36M shares.
*Institutional purchase data sourced from Fidelity, all other data sourced from Finviz.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Business relationship disclosure: Business relationship disclosure: Kapitall is a team of analysts. This article was written by Sabina Bhatia, one of our writers. We did not receive compensation for this article (other than from Seeking Alpha), and we have no business relationship with any company whose stock is mentioned in this article.