Materials sector 101: Definition & investing risks

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Many materials stocks offer dividends and can help diversify your investment portfolio. But as with any investment, knowing what to look out for could help mitigate losses.

What are materials stocks?

Materials stocks make up the materials sector — one of the 11 major sectors of the stock market. These companies find, develop and process raw materials such as oil, timber and metal. Since most of these materials are used in construction and packaging, any changes in the business cycle and economy can affect their performance.

What industries does it include?

The materials sector includes companies that make basic materials that we use in everyday items. The five major industries include:

Chemicals. Those that convert raw materials to industrial chemicals, such as plastic.
Construction. This industry comprises companies that deal primarily with the construction of buildings, roads and bridges.
Containers and packaging. These professionals tackle the design and manufacture of various types of packaging, like aluminum food containers, paint cans and cardboard boxes.
Paper and forest products. This industry is dedicated to growing and harvesting lumber, timber and paper.
Metals and mining. These companies are responsible for locating and extracting metals and minerals like aluminum, gold and silver.

Companies in the materials sector target specific resources that industries use for building, packaging and shipping. Companies often dabble in more than one raw material.
- Aluminum. Some companies specialize in mining or producing bauxite, a principal ore of aluminum. Others manufacture and distribute aluminum products.
- Chemicals. Companies that manufacture, transport, and sell chemical products used in agriculture, construction and electronics.
- Copper. Those that mine and produce the raw material as well as copper-based goods, such as electrical wiring.
- Gold. Companies that extract gold from mines.
- Metals and minerals. Companies that produce metals and minerals for industrial and jewelry use.
- Nonmetallic minerals. These mining companies pursue minerals, such as coal and nitrogen, for industrial and consumer applications.
- Oil and gas. This subcategory includes drilling, refining and marketing crude oil and natural gas. It also includes any support equipment and services, such as pipelines to transport the fuel.
- Steel and iron. Steel producers and providers that mine iron, who generally have operations around the world.
- Synthetics. Providers that manufacture chemically synthesized goods, such as inorganic minerals like salt.

How to invest in the materials sector

When investing in the materials sector, you have two options: exchange-traded funds (ETFs) or individual stocks. ETFs track the sector and hold a basket of materials stocks, which lowers your exposure to risk by diversifying your portfolio. But they usually come with higher fees and pay lower dividends. Owning shares of individual stocks can offer higher payouts, but can be riskier.
Here’s a snapshot of how to invest in stocks and ETFs:

Choose a brokerage. Compare brokerage platforms to select a firm that matches your financial goals.
Open an account. Most brokerage accounts offer online accounts. While some don’t require a deposit to open, you’ll need to fund your account before you can purchase any investments.
Select your securities. Use your platform’s resources and research tools to read up on stocks and ETFs.
Make a purchase. Place an order on a security you’d like to invest in.
Track your investments. Log into your brokerage account to monitor your stocks or ETFs.

What stocks are in the materials sector?

See how the following stocks are performing, and view details like market capitalization, the price-to-earnings (P/E) ratio, price/earnings-to-growth (PEG) ratio and dividend yield.

Company summary
BHP Group Limited operates as a resources company in Australia, Europe, China, Japan, India, South Korea, rest of Asia, North America, South America, and internationally. It operates through Petroleum, Copper, Iron Ore, and Coal segments. The company engages in the exploration, development, and production of oil and gas properties; and mining of copper, silver, zinc, molybdenum, uranium, gold, iron ore, and metallurgical and energy coal. It is also involved in mining, smelting, and refining of nickel; and potash development activities. In addition, the company provides towing, freight, marketing and trading, marketing support, finance, administrative, and other services. The company was founded in 1851 and is headquartered in Melbourne, Australia.
Historical performance
Stock information
- Market capitalization: $162308653056
- P/E ratio: 14.3901
- PEG ratio: 0
- Dividend yield: 0.0938%
Get more detailed information and learn how to buy BBL.US stock
Company summary
Compass Minerals International, Inc., provides essential minerals in the United States, Canada, the United Kingdom, and internationally. It operates through two segments, Salt and Plant Nutrition. The Salt segment produces, markets, and sells sodium chloride and magnesium chloride, including rock salt, mechanically and solar evaporated salt, and brine and flake magnesium chloride products; and purchases potassium chloride and calcium chloride to sell as finished products or to blend with sodium chloride to produce specialty products. This segment provides products for use as a deicer for roadways, consumer, and professional use; as an ingredient in chemical production; for water treatment, human, and animal nutrition; and for various other consumer and industrial uses, as well as records management services. The Plant Nutrition segment produces sulfate of potash specialty fertilizers in various grades that are used in broadcast spreaders, direct application, and liquid fertilizer solutions under the Protassium+ brand name; turf products used by the turf and ornamental markets, as well as for blends used on golf course greens; organic products; and develops and produces a portfolio of magnesium chloride-based aerial and ground fire retardant products. This segment provides its products to distributors and retailers of crop inputs, as well as growers. The company was formerly known as Salt Holdings Corporation and changed its name to Compass Minerals International, Inc. in December 2003. Compass Minerals International, Inc. was founded in 1844 and is headquartered in Overland Park, Kansas.
Historical performance
Stock information
- Market capitalization: $769572544
- PEG ratio: 0.1274
- Dividend yield: N/A%
Get more detailed information and learn how to buy CMP.US stock
Company summary
Eastman Chemical Company operates as a specialty materials company in the United States, China, and internationally. The company's Additives & Functional Products segment offers amine derivative-based building blocks, intermediates for surfactants, metam-based soil fumigants, and organic acid-based solutions; specialty coalescent and solvents, paint additives, and specialty polymers; and heat transfer and aviation fluids. It serves transportation, personal care, wellness, food, feed, agriculture, building and construction, water treatment, energy, consumables, durables, and electronics markets. Its Advanced Materials segment provides copolyesters, cellulosic biopolymers, polyvinyl butyral sheets, polyester films and window and protective films for value-added end uses in the transportation, durables, electronics, building and construction, medical and pharma, and consumables end-markets. The company's Chemical Intermediates segment offers olefin and acetyl derivatives, ethylene, and commodity solvents; and primary non-phthalate and phthalate plasticizers, and niche non-phthalate plasticizers for industrial chemicals and processing, building and construction, health and wellness, and food and feed. Its Fibers segment provides cellulose acetate tow, triacetin, cellulose acetate flake, acetic acid, and acetic anhydride for use in filtration media primarily cigarette filters; natural and solution dyed acetate yarns, and staple fiber for use in consumables, and health and wellness markets; and wet-laid nonwoven media, specialty and engineered papers, and cellulose acetate fibers for transportation, industrial, agriculture and mining, and aerospace markets. The company was founded in 1920 and is headquartered in Kingsport, Tennessee.
Historical performance
Stock information
- Market capitalization: $7113868288
- P/E ratio: 10.3422
- PEG ratio: 3.6906
- Dividend yield: 0.0535%
Get more detailed information and learn how to buy EMN.US stock
Company summary
International Paper Company produces and sells renewable fiber-based packaging and pulp products in North America, Latin America, Europe, and North Africa. It operates through two segments, Industrial Packaging and Global Cellulose Fibers. The company offers linerboard, medium, whitetop, recycled linerboard, recycled medium and saturating kraft; and pulp for a range of applications, such as diapers, towel and tissue products, feminine care, incontinence, and other personal care products, as well as specialty pulps for use in textiles, construction materials, paints, coatings, and others. The company sells its products directly to end users and converters, as well as through agents, resellers, and distributors. The company was founded in 1898 and is headquartered in Memphis, Tennessee.
Historical performance
Stock information
- Market capitalization: $20693819392
- PEG ratio: 1.2376
- Dividend yield: 0.0469%
Get more detailed information and learn how to buy IP.US stock
Company summary
LyondellBasell Industries N.V. operates as a chemical company in the United States, Germany, Mexico, Italy, Poland, France, Japan, China, the Netherlands, and internationally. The company operates in six segments: Olefins and Polyolefins"Americas; Olefins and Polyolefins"Europe, Asia, International; Intermediates and Derivatives; Advanced Polymer Solutions; Refining; and Technology. It produces and markets olefins and co-products, such as ethylene, aromatics, propylene and butadiene; polyolefins; polyethylene; and polypropylene homopolymers and copolymers; and propylene oxide and derivatives; oxyfuels and related products; and intermediate chemicals, such as styrene monomer, acetyls, and ethylene oxide. The company also produces and markets compounding and solutions, including polypropylene compounds, engineered plastics, masterbatches, engineered composites, colors and powders, and advanced polymers, such as catalloy and polybutene-1; and refines heavy, high-sulfur crude oil and other crude oils, as well as refined products, including gasoline and distillates. In addition, it develops and licenses chemical and polyolefin process technologies; manufactures and sells polyolefin catalysts; and serves food packaging, home furnishings, automotive components, and paints and coatings applications. LyondellBasell Industries N.V. was incorporated in 2009 and is headquartered in Houston, Texas.
Historical performance
Stock information
- Market capitalization: $15424151552
- PEG ratio: 0.9143
- Dividend yield: 0.1138%
Get more detailed information and learn how to buy LYB.US stock
Company summary
Newmont Corporation engages in the production and exploration of gold properties. It also explores for copper, silver, zinc, lead, and other metals. The company has operations and/or assets in the United States, Canada, Mexico, Dominican Republic, Peru, Suriname, Argentina, Chile, Australia, Papua New Guinea, Ecuador, Fiji, and Ghana, and internationally. Newmont Corporation was founded in 1916 and is headquartered in Denver, Colorado.
Historical performance
Stock information
- Market capitalization: $99662340096
- P/E ratio: 14.1104
- PEG ratio: 1.9468
- Dividend yield: 0.011%
Get more detailed information and learn how to buy NEM.US stock
Company summary
Rio Tinto Group engages in exploring, mining, and processing mineral resources worldwide. The company operates through Iron Ore, Aluminium, Copper, and Minerals Segments. The Iron Ore segment engages in the iron ore mining, and salt and gypsum production in Western Australia. The Aluminum segment is involved in bauxite mining; and alumina refining, smelting, and recycling. The Copper segment engages in mining and refining of copper, gold, silver, molybdenum, and other by-products and exploration activities. The Minerals segment is involved in mining and processing of borates, titanium dioxide feedstock, and iron concentrate and pellets; diamond mining, sorting, and marketing; and development projects for battery materials, such as lithium. It also owns and operates open pit and underground mines; and refineries, smelters, processing plants and power, and shipping facilities. The company was founded in 1873 and is headquartered in London, the United Kingdom.
Historical performance
Stock information
- Market capitalization: $117630615552
- P/E ratio: 11.457
- PEG ratio: 0
- Dividend yield: 0.0517%
Get more detailed information and learn how to buy RIO.US stock
Company summary
The Sherwin-Williams Company engages in the development, manufacture, distribution, and sale of paint, coatings, and related products to professional, industrial, commercial and retail customers. It operates through three segments: Paint Stores Group, Consumer Brands Group, and Performance Coatings Group. The Paint Stores Group segment offers architectural paint and coatings; protective and marine products; and OEM product finishes and related products for architectural and industrial paint contractors, and do-it-yourself homeowners under the Sherwin-Williams brand. The Consumer Brands Group segment supplies a portfolio of branded and private-label architectural paints, stains, varnishes, industrial products, wood finishes products, wood preservatives, applicators, corrosion inhibitors, aerosols, caulks, and adhesives to retailers, including home centers and hardware stores, and dedicated dealers and distributors. The Performance Coatings Group segment develops and sells industrial coatings for wood finishing and general industrial applications; automotive refinish products; protective and marine coatings; coil coatings; packaging coatings; and performance-based resins and colorants. This segment serves retailers, dealers, jobbers, licensees, and other third-party distributors. The company has operations in the North and South America, the Caribbean, Europe, Asia, and Australia. The Sherwin-Williams Company was founded in 1866 and is headquartered in Cleveland, Ohio.
Historical performance
Stock information
- Market capitalization: $85144829952
- P/E ratio: 33.3486
- PEG ratio: 3.3152
- Dividend yield: 0.009%
Get more detailed information and learn how to buy SHW.US stock
Company summary
Southern Copper Corporation engages in mining, exploring, smelting, and refining copper and other minerals in Peru, Mexico, Argentina, Ecuador, and Chile. The company is involved in the mining, milling, and flotation of copper ore to produce copper and molybdenum concentrates; smelting of copper concentrates to produce blister and anode copper; refining of anode copper to produce copper cathodes; production of molybdenum concentrate and sulfuric acid; production of refined silver, gold, and other materials; and mining and processing of copper, molybdenum, zinc, silver, gold and lead. It operates the Toquepala and Cuajone open-pit mines, and smelter and refinery in Peru; and La Caridad, an open-pit copper mine, as well as copper ore concentrator, SX-EW plant, smelter, refinery, and rod plant in Mexico. The company also operates Buenavista, an open-pit copper mine, as well as copper concentrators and operating SX-EW plants in Mexico. In addition, it operates underground mines that produce zinc, lead, copper, silver, and gold; coal mine; and zinc refinery. The company has interests in 156,818 hectares and 502,688 hectares of concessions in Peru and Mexico; and 168,200 hectares and 28,453 hectares of exploration concessions in Argentina and Chile. Southern Copper Corporation was incorporated in 1952 and is based in Phoenix, Arizona. Southern Copper Corporation is a subsidiary of Americas Mining Corporation.
Historical performance
Stock information
- Market capitalization: $110397685760
- P/E ratio: 29.0474
- PEG ratio: 1.2
- Dividend yield: 0.0213%
Get more detailed information and learn how to buy SCCO.US stock
Company summary
Ternium S.A., together with its subsidiaries, manufactures and distributes steel products in Mexico, Southern Region, Brazil, and internationally. It operates through two segments, Steel and Mining. The Steel segment offers slabs, heavy plates, hot and cold rolled products, coated products, stamped steel parts for the automotive industry, roll-formed and tubular products, billets, bars, and other products, including sales of energy. Its Mining segment sells iron ore and pellets. It also provides medical and social; scrap; renewable energy; and engineering and other services, as well as operates as a distribution company. In addition, the company engages in the exploration, exploitation, and pelletizing of iron ore. Ternium S.A. was founded in 1961 and is based in Luxembourg City, Luxembourg. Ternium S.A. is a subsidiary of Techint Holdings S.à r.l.
Historical performance
Stock information
- Market capitalization: $7129894912
- P/E ratio: 12.5241
- PEG ratio: 4.03
- Dividend yield: 0.0743%
Get more detailed information and learn how to buy TX.US stock

What ETFs track the materials sector?

Several popular ETFs that follow the materials sector include:

Fidelity MSCI Materials ETF (FMAT)
First Trust Materials AlphaDEX Fund (FXZ)
Invesco S&P 500 Equal Weight Materials ETF (RTM)

Materials Select Sector SPDR ETF (XLB)
SPDR Metals and Mining ETF (XME)
Vanguard Materials Index Fund (VAW)

Why invest in the materials sector?

Materials stocks provide the raw materials necessary to produce goods and services. These are popular investments because these companies tend to thrive in a strong economy.
Many materials stocks also generate regular cash flow and return cash to shareholders through consistent dividends. While the S&P 500 index dividend yield is 1.96% as of June 22, 2020, the SPDR S&P Metals and Mining ETF dividend yield is 3.03%. And a few individual stocks are boasting dividend yields closer to 6%.

What unique risks does the materials sector face?

The materials sector is especially vulnerable to the global economy, international politics and fluctuating demand. For example, materials stocks can get caught in the crosshairs of geopolitical tensions and trade wars. Tariffs can lead to higher prices, which can delay or deter sales.
Materials stocks can also plunge when there is low demand, especially during economic recessions.

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Bottom line

The materials sector may be a good option if you’re looking for cash dividends and the potential for profit in a flourishing economy. But it comes with unique risks because of its sensitivity to the global economy, trade and politics.
Be sure to explore your online trading platform options to pick a brokerage account that best fits your investment portfolio.

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Kimberly Ellis is a personal finance writer at Finder, specializing in banking and financial literacy. After teaching in public and private schools, Kimberly zeroed in on personal financial education to help families and kids develop lifelong money skills. She hails from New York City, graduating summa cum laude from Queens College with a BA in elementary education and mathematics, as well as a New York State teaching certificate. She’s also an aspiring polyglot, always in a book and forever on the hunt for the perfect classic red lipstick. See full bio

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Investing in materials stocks

Investments that can thrive in a strong economy, but are risky in an economic downturn.

What are materials stocks?

What industries does it include?

What raw materials do companies in this sector control?

How to invest in the materials sector

What stocks are in the materials sector?

BHP Group (BBL.US)

Compass Minerals International (CMP.US)

Eastman Chemical Company (EMN.US)

International Paper (IP.US)

LyondellBasell Industries (LYB.US)

Newmont Goldcorp (NEM.US)

Rio Tinto ADR (RIO.US)

Sherwin-Williams (SHW.US)

Southern Copper Corporation (SCCO.US)

Ternium SA ADR (TX.US)