Performance And Yield Review Of The Key S&P 500 Basic Materials Sector Members

 |  Includes: DD, DOW, FCX, MON, NEM, PX, XLB
by: Zvi Bar

The basic materials sector refers to companies involved in the discovery, development and processing of raw materials. It is also sometimes referred to as the basic industries sector. This sector includes the industries involved in the production of chemicals, metals & mining, paper & forest products, containers & packaging, specialty retail and construction materials.

The basic materials sector is considered highly sensitive to changes in the business cycle. In particular, these industries are affected by changes in demand for products and the price of raw materials. Higher raw materials prices and/or lower demand for the processed materials they make tend to hurt this sector and its components.

This is a review of the most heavily weighted basic materials companies within the S&P 500. I have included those components that have over a 5% weighting/allocation within the basic materials sector. The resulting six companies make up approximately 50% of the total weighting of the S&P 500 basic materials sector. I have provided their present yields and sector weighting, as well as their 1-month, 3-month and 2011-to-date performance rates.

E.I. DuPont de Nemours & Co (NYSE:DD): DuPont produces specialty products for use in various disciplines, including agriculture and industrial biotechnology, chemistry, biology, materials science and manufacturing.

  • Yield: 3.5%
  • Sector Weight: 11.31%
  • 1-month: 0.83%
  • 3-month: -4.94%
  • 2011-to-date: -5.53%

Freeport-McMoran Copper & Gold Inc (NYSE:FCX): Freeport-McMoran ne of the world’s largest copper, gold and molybdenum mining companies in terms of reserves and production.

  • Yield: 2.4%
  • Sector Weight: 10.19%
  • 1-month: -10.76%
  • 3-month: -13.23%
  • 2011-to-date: -30.73%

Monsanto Co. (NYSE:MON): Monsanto is a global provider of agricultural products for farmers. Our seeds, biotechnology trait products, and herbicides provide farmers with solutions that improve productivity, reduce the costs of farming, and produce better foods for consumers and better feed for animals.

  • Yield: 1.7%
  • Sector Weight: 9.67%
  • 1-month: -0.61%
  • 3-month: 5.95%
  • 2011-to-date: 0.19%

Dow Chemical Co. (NYSE:DOW): Dow operates specialty chemical, advanced materials, agrosciences and plastics businesses.

  • Yield: 3.5%
  • Sector Weight: 8.60%
  • 1-month: -4.24%
  • 3-month: -18.17%
  • 2011-to-date: -17.10%

Praxair Inc (NYSE:PX): Praxair is the largest industrial gas supplier in North and South America, with strong market shares elsewhere. Praxair’s primary products for sale are atmospheric gases (oxygen, nitrogen, argon, rare gases) and process gases (carbon dioxide, helium, hydrogen, electronic gases, specialty gases, acetylene).

  • Yield: 2%
  • Sector Weight: 7.93%
  • 1-month: 2.45%
  • 3-month: -0.25%
  • 2011-to-date: 5.58%

Newmont Mining (NYSE:NEM): Newmont is primarily a gold producer with primary assets or operations in the United States, Australia, Peru, Indonesia, Ghana, Canada, New Zealand and Mexico.

  • Yield: 1.8%
  • Sector Weight: 6.34%
  • 1-month: 11.27%
  • 3-month: 27.39%
  • 2011-to-date: 6.98%

Generally, the industries in the basic materials sector will not cycle into or out of favor simultaneously, but such can occur due to global recessions, severe commodity price volatility or other economic factors. Additionally, these industries do further sub-divide indo sub-industries that also may not cycle together. For example, within the metals & mining industry the industrial metal producers have been under pressure over the last few months, while several of the precious metal miners have performed reasonably well.

The basic materials sector presently accounts for approximately 3.5% of the total S&P 500, which makes it the sector with the lowest present weighting. The 30 companies that make up this portion of the S&P 500 can also be tracked via the Materials Select Sector SPDR ETF (NYSEARCA:XLB), as well as several other tracking funds.

Disclaimer: This article is intended to be informative and should not be construed as personalized advice, as it does not take into account your specific situation or objectives.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.