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What follows is a list of companies involved in basic materials that have 20% or greater upside. They cover a variety of different industries: iron, steel, and gold. The one that is least preferred on the Street, Newmont Mining, actually has the most to gain by my calculations. The firm also has the highest dividend yield at 2.6% and is the safest with 70% lower volatility than the broader market. I expect Jim Cramer to initiate big "buy" calls on these firms. While gold provides a nice hedge against inflation and a double dip, iron and steel provide a strong bet on just the opposite - a recovery. A combination of the two can thus reduce risk while allowing investors the possibility of significant returns. All ratings were sourced from T1 Banker.

Newmont Mining (NYSE:NEM)

Newmont is rated a "hold" and trades at a respective 55.4x and 9.4x past and forward earnings with a dividend yield of 2.6%.

Consensus estimates for Newmont's EPS forecast that it will grow by 18.7% to $5.21 in 2012, grow by 9.8% in 2013, and then fall by 5.6% in 2014. Assuming a multiple of 13x and a conservative 2013 EPS of $5.67, the rough intrinsic value of the stock is $73.71, implying 37.1% upside. Since Newmont is the biggest international unhedged gold producer, investors can maximize returns off of inflationary fears. Additional gold discoveries and strong leverage to gold prices further make this firm an attractive pick.

Gerdau (NYSE:GGB)

Gerdau is rated a "buy" and trades at a respective 15.9x and 8.7x past and forward earnings with a dividend yield of 1.7%.

Consensus estimates for Gerdau's EPS forecast that it will decline by 22.7% to $1.16 in FY2011 and then grow by 6% and 69.1% in the following two years. Assuming a multiple of 11x and a conservative FY2012 of $1.19, the rough intrinsic value of the stock is $13.09, implying 22.6% upside. Steel production grew by an impressive 14% y-o-y in the most recent quarter when the industry was struggling. Gerdau specializes in long-rolled and is well positioned to gain from Brazil's growing demand for steal beams and infrastructure.

Yamana Gold (NYSE:AUY)

Yamana is rated a "buy" and trades at a respective 30x and 9.9x past and forward earnings with a dividend yield of 1.4%.

Consensus estimates for Yamana's EPS forecast that it will grow by 25% to $1.20 in 2012, grow by 26.7% in 2013, and then decline by 9.9% in 2014. Assuming a multiple of 13x and a conservative 2013 EPS of $1.48, the rough intrinsic value of the stock is $19.24, implying 23.9% upside. The firm has attractively shifted to lower-cost production through its Chapada and El Penon operations. Overall, I find that Yamana is a solid investment - especially in light of the 10% gold grade improvement in El Penon, facility modernization, and its strong management.

Source: 3 Basic Materials Jim Cramer Will Recommend Soon

Additional disclosure: We seek IR business from all of the firms in our coverage, but research covered in this note is independent and for prospective clients. The distributor of this research report, Gould Partners, manages Takeover Analyst and is not a licensed investment adviser or broker dealer. Investors are cautioned to perform their own due diligence.