10 Basic Materials Stocks With Strong Profitability That Still Aren't Catching A Break

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Includes: BTUUQ, CLF, FCX, ROC, SOA, SWC, TS, VEDL, WLT, YZC
by: Follow My Alpha

It's no secret that basic material companies have been taking a walloping in the market recently but that doesn't mean one should count them out yet. In particular, despite weak global growth expectations by the world at large Goldman Sachs just added BHP Billiton (BHP) to its Conviction Buy List last week. The takeaway is that some of the best potential opportunities are found in beat up spaces and at this point there are some interesting profitable names in this space in our view that are worth reviewing because of poor short-term performance.

EPS growth (earnings per share growth) illustrates the growth of earnings per share over time. EPS growth rates help investors identify stocks that are increasing or decreasing in profitability. This profitability metric is generally a key driver in the price of the stock as it directly correlates to the profitability of the company as a whole.

We first looked for basic materials stocks trading with strong bottom line profitability (Net Margin (TTM)>10%). From this narrowed list of candidates we then looked for companies that have illustrated clear bearish momentum by underperforming the S&P500 (NYSEARCA:SPY) over the last 3 months. We did not screen out any market caps.

The list is ranked from worst to least worst by 3-month performance:

1. Walter Energy Inc. (WLT)

Sector

Basic Materials

Industry

Coal

Market Cap

$4,723M

2.20

The company offers a line of coal products and services along with home construction. The company has a net margin (TTM) of 20.39% & has lost -38.18% over the last three months. The short interest was 4.60% as of 10/14/2011.

2. Yanzhou Coal Mining Company Li. (YZC)

Sector

Basic Materials

Industry

Coal

Market Cap

$12,148M

Beta

2.41

The company mines, prepares, and sells coal and railway services for coal products. The company has a net margin (TTM) of 21.87% & has lost -35.51% over the last three months. The short interest was N/A as of 10/14/2011.

3. Sterlite Industries (India), L. (SLT)

Sector

Basic Materials

Industry

Industrial Metals & Minerals

Market Cap

$8,672M

Beta

2.35

The company mines and produces non-ferrous metals. The company has a net margin (TTM) of 16.17% & has lost -30.13% over the last three months. The short interest was N/A as of 10/14/2011.

4. Tenaris SA. (TS)

Sector

Basic Materials

Industry

Steel

Market Cap

$18,776M

Beta

1.87

The company manufactures and supplies steel pipe products and related services. The company has a net margin (TTM) of 13.97% & has lost -28.03% over the last three months. The short interest was N/A as of 10/14/2011.

5. Stillwater Mining Company. (SWC)

Sector

Basic Materials

Industry

Industrial Metals & Minerals

Market Cap

$1,309M

Beta

2.65

The company mines, refines, and sells palladium and palladium associated metals. The company has a net margin (TTM) of 17.21% & has lost -25.75% over the last three months. The short interest was 12.20% as of 10/14/2011.

6. Peabody Energy Corporation. (BTU)

Sector

Basic Materials

Industry

Coal

Market Cap

$11,746M

Beta

1.42

The company owns, mines, and sells coal around the world. The company has a net margin (TTM) of 12.04% & has lost -24.39% over the last three months. The short interest was 4.50% as of 10/14/2011.

7. Solutia, Inc. (SOA)

Sector

Basic Materials

Industry

Chemicals

Market Cap

$1,984M

Beta

2.30

The company has a net margin (TTM) of 12.38% & has lost -24.21% over the last three months. The short interest was 2.60% as of 10/14/2011.

8. Rockwood Holdings Inc. (ROC)

Sector

Basic Materials

Industry

Specialty Chemicals

Market Cap

$3,541M

Beta

3.06

The company develops, manufactures, and sells high value-added specialty chemicals and advanced materials for a variety of spaces. The company has a net margin (TTM) of 12.54% & has lost -23.86% over the last three months. The short interest was N/A as of 10/14/2011.

9. Cliffs Natural Resources Inc. (CLF)

Sector

Basic Materials

Industry

Steel

Market Cap

$9,961M

Beta

2.45

The company produces and sells iron ore pellets in North America. The company has a net margin (TTM) of 26.27% & has lost -23.74% over the last three months. The short interest was N/A as of 10/14/2011.

10. Freeport-McMoRan Copper & Gold. (FCX)

Sector

Basic Materials

Industry

Copper

Market Cap

$38,162M

Beta

1.86

The company explores for, mines, and produces copper, gold, and silver. The company has a net margin (TTM) of 25.11% & has lost -23.51% over the last three months. The short interest was 2.00% as of 10/14/2011.

We hope this list helps investors as they do their own due diligence and research on basic materials stocks.

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