The rule doesn't just apply to companies operating in the materials sector. It's one that's relevant at all times, in all markets and across the investment spectrum: when the fundamentals line up, it's time to buy. Don't think. Don't argue. Just buy. Here are a number of companies in the basic materials sector that are now flashing extraordinary fundamentals and should therefore be considered for all value investing portfolios.
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The first is Huntsman Corporation (NYSE:HUN), manufacturers of chemicals for the aerospace, electronics, medical and construction industries. Huntsman has a P/E of 8.29 and an annual dividend yield of 6.49%.
The shares trade at a discount to book value with a P/B of 0.96 and a puny price-to-sales ratio of 0.17. Huntsman stock is up over 280% in the last three months. (To learn more about the price-to-sales ratio read Using The Price-To-Sales Ratios To Value Stocks.)
Madeco SA (NYSE:MAD) is a Chilean manufacturer of copper and aluminum pipes, bars, coils, wire and cable. Fundamentally, the company is as sound as any in the current investment world. It yields 8.60% annually, has a trailing P/E of 14.87, sells for less than the breakup value of the company (P/B is 0.79) and fetches just 0.30x yearly sales. These numbers scream value!
Madeco is looking to refocus its business towards its resealable freezer bag division and away from copper reliant products. Company president Cristian Montes defended his company's decision, saying, "We are not expecting a big drop in demand for plastic bags, because people aren't going to stop eating." Madeco stock is up over 30% in the last month. (To learn more about breakup value, see Use Breakup Value To Find Undervalued Companies.)
The Olin Corporation (NYSE:OLN) operates two distinct businesses: chlor alkalai products, including bleaches, chlorine and caustic soda and the Winchester line of ammunition products. And it's thanks to the ammo that the company is up nearly 50% since bottoming in March of this year. Sales of Winchester ammunition increased sharply year over year (to a record this past quarter), while sales in its chemical manufacturing segment declined.
The company fundamentals are outstanding, too. Olin trades with a P/E ratio of 6.12 and offers investors a 6.01% dividend. The company, incidentally, has paid the dividend to investors for an impressive 330 uninterrupted quarters. Olin trades at 1.52x book value and 0.61x sales.
There are rarely times when investment fundamentals line up so nicely. And if you're an investor who believes the commodity bull market story, these three companies look to offer a safe ride while offering value and paying a dividend. (To learn more, see or related article What Are Fundamentals?)