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The best performing stocks are usually stocks with high growth rates or expected growth rates. But this does not mean that one should always invest in growth stocks rather than value stocks. In fact, value stocks historically beat growth stocks on average. The reason is simple. Value stocks usually have low or even negative growth expectations, and it is relatively easy for them to beat such expectations. Growth stocks, on the other hand, are usually expected to have higher growth rates and their stock prices also reflect such high expectations. Therefore, it is more difficult for growth stocks to beat these challenging expectations.

Below, we ranked basic material companies based on their expected five-year growth rates. All companies have at least $10 billion market cap. The data is sourced from Finviz. Contrarian investors should focus on the stocks that are at the top of the table because these stocks are more likely to beat lowered expectations.

Plains All American Pipeline LP (NYSE:PAA) seems to have the highest upside potential. It is expected to grow at only 5.05% annually over the next five years. It has a market cap of $12B and a P/E ratio of 17.84. PAA is mainly engaged in the transportation, storage, terminalling and marketing of crude oil, refined products and liquefied petroleum gas. The company reported net income of $281 million for the third quarter of 2011, up from $81 million for the same quarter last year. At the end of September, Chuck Royce's Royce & Associates had $17 million invested in PAA. The stock was up 27.54% so far since then, beating the market by more than 9 percentage points.

ConocoPhillips (NYSE:COP) is also expected to grow at a less than 6% rate. Its EPS growth is expected to be 5.8% per year over the next five years. As a result, COP has a low P/E ratio of 9.13. Its forward P/E ratio is even lower. The $95 billion market cap stock has a forward P/E ratio of 8.47. ConocoPhillips is an international, integrated energy company. For the third quarter of 2011, its net income was $2.6 billion, compared with $3.1 billion for the same period of 2010. At the end of the third quarter, there are 32 hedge funds with COP positions. For example, Warren Buffett's Berkshire Hathaway (NYSE:BRK.A) had $1.8 billion invested in COP. Bill Miller, Cliff Asness, and Wallace Weitz are also bullish about the stock.

One mega-cap stock with high upside potential is Chevron Corporation (NYSE:CVX) . The stock has a market cap of $213B and a low P/E ratio of 7.93. Its EPS is expected to grow at 6.86% annually over the next five years. It also has a low forward P/E ratio of 8.23. Chevron reported net income of $7.8 billion for the third quarter of 2011, up from $3.8 billion for the same quarter a year earlier. CVX is also quite popular among hedge funds. There are 38 hedge funds disclosed to own CVX at the end of the third quarter. Both Bill Miller's Legg Mason Capital Management and Cliff Asness' AQR Capital Management invested $100+ million in CVX at the end of September.

We like basic material stocks. Most stocks in this sector are trading at attractive multiples, indicating some form of perceived value of the stocks. The market has started to recover from the European debt crisis. It was up over 15% since the end of the third quarter. In our opinion, the economy will continue growing. So will basic material stocks. Therefore, we think it is the right time to purchase these stocks with high upside potential before they get more expensive with the economy growth.

Ticker

Company

P/E

EPS growth next 5 years

(PAA)

Plains All American Pipeline

17.84

5.05%

(COP)

ConocoPhillips

9.13

5.80%

(NYSE:FCX)

Freeport-McMoRan

7.76

6.02%

(NYSE:WPZ)

Williams Partners L.P.

18.97

6.08%

(NYSE:SE)

Spectra Energy Corp.

16.98

6.68%

(CVX)

Chevron Corporation

7.93

6.86%

(NYSE:EPD)

Enterprise Products Partners

25.6

7.56%

(NYSE:KMP)

Kinder Morgan Energy

536.06

7.86%

(EP)

El Paso Corp.

900.33

8.00%

(NYSE:CHK)

Chesapeake Energy

11.12

8.13%

(NYSE:XOM)

Exxon Mobil Corporation

10.49

8.14%

(NYSE:DVN)

Devon Energy Corporation

12.99

8.54%

(NYSE:DOW)

The Dow Chemical Co

13.57

9.00%

(NYSE:HES)

Hess Corporation

10.99

9.40%

(NYSE:DD)

DuPont

13.42

9.70%

(NYSE:MRO)

Marathon Oil Corporation

12.25

10.12%

(NYSE:SCCO)

Southern Copper Corp.

13.23

10.47%

(NYSE:OKS)

ONEOK Partners, L.P.

21.05

10.47%

(NYSE:PPG)

PPG Industries Inc.

13

10.89%

(NYSE:APA)

Apache Corp.

9.43

11.22%

(NYSE:PX)

Praxair Inc.

24.59

11.27%

(NYSE:MON)

Monsanto Co.

25.27

11.90%

(NYSE:APD)

Air Products & Chemicals

16.43

12.23%

(NYSE:CLR)

Continental Resources Inc.

28.24

12.75%

(NYSE:FTI)

FMC Technologies, Inc.

32.74

13.00%

(NYSE:CLF)

Cliffs Natural Resources Inc.

5.48

13.07%

(NYSE:PXD)

Pioneer Natural Resources

22.47

14.00%

(NYSE:MUR)

Murphy Oil Corporation

11.42

14.02%

(NYSE:OXY)

Occidental Petroleum

13.05

14.81%

(NYSE:NOV)

National Oilwell Varco, Inc.

17.27

15.00%

(NYSE:NBL)

Noble Energy, Inc.

22.16

15.99%

(NYSE:VLO)

Valero Energy Corporation

5.88

16.22%

(NYSE:APC)

Anadarko Petroleum

NA

16.38%

(NYSE:SWN)

Southwestern Energy Co.

16.14

17.24%

(NYSE:CF)

CF Industries Holdings, Inc.

9.42

17.37%

(NYSE:NEM)

Newmont Mining Corp.

12.63

17.77%

(NYSE:WMB)

Williams Companies, Inc.

16.91

19.50%

(NYSE:CAM)

Cameron International

23.09

20.31%

(NYSE:MOS)

The Mosaic Company

10.28

21.00%

(NYSE:SLB)

Schlumberger Limited

22.63

22.19%

(NYSE:AA)

Alcoa, Inc.

19.21

22.36%

(NYSE:NUE)

Nucor Corporation

21.67

24.93%

(NYSE:KMI)

Kinder Morgan, Inc.

46.52

26.06%

(NYSE:HAL)

Halliburton Company

12.25

27.64%

(NYSE:BHI)

Baker Hughes Incorporated

12.13

27.88%

(NYSE:BTU)

Peabody Energy Corp.

10.88

33.04%

(NYSE:MPC)

Marathon Petroleum

4.77

37.00%

(NYSE:EOG)

EOG Resources, Inc.

27.36

47.81%

(NYSE:CXO)

Concho Resources, Inc.

19.99

49.28%

Source: Top Basic Material Stocks With The Highest Upside Potential