Materials Stocks To Lead In 2018

Materials equities look ready to gain as inflation pressures build.

The Candidate Pool

2017 Status

P/E

PEG (5 yr)

PPB

PPS

Ecolab (ECL)

Base

29.38

2.33

5.37

2.87

DowDupont (DWDP)

Base

24.99

2.83

1.62

2.12

FMC Corp (FMC)

Breakout

38.96

2.08

5.99

4.59

International Paper (IP)

Base

19.86

1.48

4.87

1.06

PPG Industries (PPG)

Base

19.81

2.07

5.04

2.06

Vulcan Materials (VMC)

Accumulator

45.94

2.47

3.62

4.45

Bemis Co. (BMS)

Accumulator

19.51

3.94

3.40

1.08

2017 Status

Debt/Equity

5-yr Yield

Payout Ratio

Ecolab

Base

103.54

1.08%

33.41%

DowDupont

Base

35.30

3.19%

91.09%

FMC Corp

Breakout

79.95

1.05%

31.13%

International Paper

Base

249.97

3.20%

85.28%

PPG Industries

Base

78.29

1.41%

32.04%

Vulcan Materials

Accumulator

60.08

0.37%

34.30%

Bemis Co.

Accumulator

121.60

2.51%

56.67%

Since Donald Trump’s election there has been a sharp divergence in the performance of S&P equities relative to commodity prices. Traditionally, profitable companies sell more goods and services and enjoy higher equity prices; increased production of goods and services drive higher commodity prices as demand on finite resources increases. However, commodity prices have struggled to return to levels 20 years ago despite the S&P trading at new multi-year highs and at multiples it traded at 20 years ago. The divergence between commodity and equity prices since Trump’s election has been driven by the removal and weakening of environmental standards by the current Administration following the appointment of climate-change skeptic and industrial fave, Scott Pruitt, to the EPA. But as with any legislative change, real change comes slowly and it’s unlikely the current commodity discount and divergence can continue without some form of re-alignment.