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When we think about materials we think red. Red like the losses that the basic materials sector have incurred all year long. Is there opportunity in this decimated space? We think there is but at the same time investors should be careful not to get stuck with a rotten egg. In that some basic materials companies may look like a steal to investors today based off price-multiple valuations but may not actually hold much value.

We screened for basic materials companies that dramatically underperformed the S&P 500 last week alone. From this narrowed pool of names we then screened for companies that appear undervalued by their forward P/E (X<10).

The list is ranked from highest to lowest by the forward P/E ratio:

1. Albemarle Corp (NYSE:ALB)

Sector

Basic Materials

Industry

Specialty Chemicals

Market Cap

$4249 million

Beta

1.51

Analyst Sentiment

7/12-List Buy/Outperform (Buy)

The company develops and sells engineered specialty chemicals all over the world. The company’s 1 week return is -20.32%. The company’s forward P/E is 9.01. The short interest for the company is 1% as of 8/15/2011.

2. James River Coal Company (JRCC)

Sector

Basic Materials

Industry

Coal

Market Cap

$364 million

Beta

1.96

Analyst Sentiment

6/11-List Hold/Neutral (Neutral)

The mines and produces bituminous, steam, and industrial grade coal in the US. The company’s 1 week return is -19.59%. The company’s forward P/E is 8.4. The short interest for the company is 35% as of 8/15/2011.

3. Huntsman Corporation (NYSE:HUN)

Sector

Basic Materials

Industry

Specialty Chemicals

Market Cap

$2836 million

Beta

2.15

Analyst Sentiment

4/8-List Buy/Outperform (Buy)

The company makes organic and inorganic chemical products worldwide. The company’s 1 week return is -15.79%. The company’s forward P/E is 5.61. The short interest for the company is 3% as of 8/15/2011.

We hope this help investors as they do their own due diligence on basic materials companies.

Source: 3 Cheap Materials Stocks That Underperformed The Market Last Week