10 Large Cap Commodity Stocks With Bullish Momentum

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 |  Includes: DOW, E, FCX, HAL, MON, MPC, MT, NOV, RIO, VLO
by: Rash Menaria

The following is a list of ten large cap commodity stocks which are showing bullish momentum off-late and have gained over 20% in last one week.

No.

Ticker

Company

Market Cap (mn)

Forward P/E

1

DOW

The Dow Chemical company

30,936

8.50

2

E

Eni SpA

81,509

7.29

3

FCX

Freeport-McMoRan Copper & Gold Inc.

34,152

5.84

4

HAL

Halliburton company

32,040

7.71

5

MON

Monsanto Co.

39,442

18.72

6

MPC

Marathon Petroleum Corporation

11,753

5.08

7

MT

Arcelor Mittal

29,314

5.76

8

NOV

National Oilwell Varco, Inc.

26,026

10.85

9

RIO

Rio Tinto plc

97,367

5.42

10

VLO

Valero Energy Corp.

12,037

4.93

Click to enlarge

My favorite company in the above list is Arcelor Mittal. Arcelor Mittal is a global steel producer. Arcelor Mittal produces a range of finished and semi-finished products. Arcelor Mittal produces flat products, including sheet and plate, long products, including bars, rods and structural shapes, and stainless steel products. The company operates in five segments: Flat Carbon Americas; Flat Carbon Europe; Long Carbon Americas and Europe; Asia, Africa and Commonwealth of Independent States and Distribution Solutions.

Arcelor’s EPS forecast for the current year is 2.36 and next year is 3.26. According to the consensus estimates, its top line is expected to grow 18.50% in the current year and 4.90% next year. It is trading at a forward P/E of 5.76. Out of seven analysts covering the company, five are positive and have buy recommendations and two have hold ratings. The median target price for the stock is $31 vs. the current market price of $19.05.

There are some near term challenges for ArcelorMittal from the expected slowdown in European automotive production in Q3, a likely pause in re-stocking and the consequent risk of falling spot prices. However, the company is trading at a forward PE of just 5.25 and I believe at these valuations most of the negatives are already priced into the stock.

ArcelorMittal is a global leader in the steel industry, with a market share of ~9% and significant backward integration into iron ore and coking coal. The company is trading around its 2009 lows despite the fact that it has a stronger business model (more integration into raw materials than 2009 and better configuration of a plant) and a far better balance sheet, with lower duration risk on debt and less strict covenants. I believe ArcelorMittal is a good value buy at current price for medium to long term duration.

Monsanto is another good long candidate among above stocks. Monsanto along with its subsidiaries, is a provider of agricultural products for farmers. The company's 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. It manages business in two segments: Seeds and Genomics, and Agricultural Productivity.

Monsanto’s EPS forecast for the current year is 3.42 and next year is 3.94. According to the consensus estimates, its top line is expected to grow 5.80% in the current year and 6.30% next year. It is trading at a forward P/E of 18.72. Out of 21 analysts covering the company, 14 are positive and have buy recommendations, one has a sell recommendation and six have hold ratings. I believe agriculture commodities will not see 2008 kind of correction in this downturn and high prices will continue to be a positive for farm economics.

The Dow Chemical company is a diversified manufacturer and supplier of products used primarily as raw materials in the manufacture of customer products and services worldwide. It operates in eight segments. Dow provides services to a range of industries, including appliance, automotive, agricultural, building and construction, chemical processing, electronics, furniture, house wares, oil and gas, packaging, paints, coatings and adhesives, personal care pharmaceutical processed foods pulp and paper textile. Dow Chemical’s EPS forecast for the current year is 2.81 and next year is 3.08. According to the consensus estimates, its top line is expected to grow 12.00% in the current year and 2.70% next year. It is trading at a forward P/E of 8.50. Out of 18 analysts covering the company, nine are positive and have buy recommendations and nine have hold ratings.

Eni SpA is engaged in the oil and gas exploration and production, gas marketing operations, management of gas infrastructures, power generation, petrochemicals, oil field services and engineering industries. The company segments include Exploration & Production, Gas & Power, Refining & Marketing, Engineering & Construction, Petrochemicals and other activities. Eni Spa’s EPS forecast for the current year is 5.19 and next year is 5.58. According to the consensus estimates, its top line is expected to grow 10% in the current year and 1.40% next year. It is trading at a forward P/E of 7.29. Out of four analysts covering the company, three are positive and have buy recommendations and one have hold ratings.

Freeport-McMoRan Copper & Gold Inc. is a copper, gold and molybdenum mining company. Its portfolio of assets includes the Grasberg minerals district in Indonesia, mining operations in North and South America, and the Tenke Fungurume minerals district in the Democratic Republic of Congo. FCX operates seven copper mines in North America and four in South America. FCX’s EPS forecast for the current year is 5.91 and next year is 6.17. According to the consensus estimates, its top line is expected to grow 21.50% in the current year and 2% next year. It is trading at a forward P/E of 5.84. Out of 21 analysts covering the company, 16 are positive and have buy recommendations, two have sell recommendations and three have hold ratings.

Halliburton company is an oilfield services company. The company’s two business segments are the Completion and Production segment and the Drilling and Evaluation segment. The company provides a range of services and products for the exploration, development, and production of oil and natural gas around the world. It conducts business in approximately 80 countries. The business operations of its divisions are around four primary geographic regions: North America, Latin America, Europe/Africa/CIS, and Middle East/Asia. Halliburton’s EPS forecast for the current year is 3.37 and next year is 4.52. According to the consensus estimates, its top line is expected to grow 35.80% in the current year and 18.50% next year. It is trading at a forward P/E of 7.71. Out of 35 analysts covering the company, 34 are positive and have buy recommendations and one have hold ratings.

Marathon Petroleum Corporation is a petroleum product refiners, transporters and marketers in the United States. The company's refining, marketing and transportation operations are concentrated in the Midwest, Gulf Coast and Southeast regions of the United States. These include a six-plant refining network, a terminal and transportation system, and wholesale and retail marketing operations. Marathon Petroleum’s EPS forecast for the current year is 7.83 and next year is 6.49. According to the consensus estimates, its top line is expected to decline 1.10% in the next year. It is trading at a forward P/E of 5.08. Out of 15 analysts covering the company, 11 are positive and have buy recommendations and four have hold ratings.

National Oilwell Varco Inc. is a provider of equipment and components used in oil and gas drilling and production operations, oilfield services and supply chain integration services to the upstream oil and gas industry. It operates in three business segments: Rig Technology, Petroleum Services & Supplies and Distribution Services. National Oilwell Varco’s EPS forecast for the current year is 4.45 and next year is 5.66. According to the consensus estimates, its top line is expected to grow 15.90% in the current year and 19.50% next year. It is trading at a forward P/E of 10.85. Out of 31 analysts covering the company, 28 are positive and have buy recommendations and three have hold ratings.

Rio Tinto plc is engaged in minerals exploration, development, production and processing. The company’s product groups include aluminum, copper, diamonds and minerals, energy, and iron ore. Its major products are aluminum, copper, diamonds, coal, iron ore, uranium, molybdenum, gold, borates, titanium dioxide, salt and talc. The company’s businesses include open pit and underground mines, mills, refineries and smelters, as well as a number of research and service facilities. Rio Tinto’s EPS forecast for the current year is 8.86 and next year is 9.49. According to the consensus estimates, its top line is expected to grow 8.20% in the current year and 6.40% next year. It is trading at a forward P/E of 5.42. All the seven analysts covering the company are positive and have buy recommendations.

Valero Energy Corporation is a North America’s independent petroleum refiner and marketer. It operates in three segments: refining, ethanol and retail. Valero Energy Corporation’s EPS forecast for the current year is 4.32 and next year is 4.27. According to the consensus estimates, its top line is expected to grow 42.90% in the current year and 3.90% next year. It is trading at a forward P/E of 4.93. Out of 20 analysts covering the company, nine are positive and have buy recommendations, one has a sell recommendation and ten have hold ratings.

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