Basic Materials represents companies that are involved with the discovery, development and processing of raw materials. This also includes the mining and refining of metals, chemical producers and forestry products. Since the sector supplies materials for construction and manufacturing, it is no surprise that its performance is cyclical in nature. (For related reading, see The Ups And Downs Of Investing In Cyclical Stocks) This typically occurs in the early recovery stage, when consumer expectations rise, industrial production grows, interest rates bottoms out and the yield curve steepens.

IN PICTURES: 20 Tools For Building Up Your Portfolio

Over the course of this year, escalating raw material prices have sent many basic material stocks soaring. Notably would be stocks related to gold, which have consistently hit new all time highs throughout the year. Unlike most other basic materials, the run up in gold has not been attributed to a higher demand as a result of manufacturing. Rather, the demand has been in due part to cautious investors who are unsure of the stability of the recovery. Thus, they have decided to hedge their bets by buying gold for the purposes of having a stable store of value during possible rough times.

Nevertheless, investors who had exposure into the basic materials sector via the PowerShares Dynamic Basic Material ETF (NYSE:PYZ) would have received about a 20% return year to date. However, picking individual basic materials stocks could have yielded substantially higher returns. Here are 6 basic materials stocks that have returned triple digit returns this year.

Company Market Cap (Billions) YTD % Gain
RPC Inc.(NYSE:RES) 2.81B +146.35%
Kronos Worldwide Inc. (NYSE:KRO) 2.09B +163.08%
New Gold, Inc.(NYSE:NGD) 3.47B +143.41%
NovaGold Resources Inc.(NYSE:NG) 3.24B +134.26%
Silver Wheaton Corp.(NYSE:SLW) 11.8B +126.76%
Molycorp, Inc.(NYSE:MCP) 2.34B +200.00%

Bottom Line

Not surprisingly, half of the stocks on the list involve previous metals. As the economy starts recovering, it could be a strategically profitable time to add a basic materials position to your portfolio that may yield triple digit returns in the future.

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Related Articles
  1. Economics

    India: Why it Might Pay to Be Bullish Right Now

    Many investors are bullish on India for all the right reasons. Does it present an investing opportunity?
  2. Stock Analysis

    Analyzing Altria's Return on Equity (ROE) (MO)

    Learn about Altria Group's return on equity (ROE) and analyze net profit margin, asset turnover and financial leverage to determine what is causing its high ROE.
  3. Investing Basics

    Building My Portfolio with BlackRock ETFs and Mutual Funds (ITOT, IXUS)

    Find out how to construct the ideal investment portfolio utilizing BlackRock's tools, resources and its popular low-cost exchange-traded funds (ETFs).
  4. Investing News

    Icahn's Bet on Cheniere Energy: Should You Follow?

    Investing legend Carl Icahn continues to lose money on Cheniere Energy, but he's increasing his stake. Should you follow his lead?
  5. Stock Analysis

    Analyzing Google's Return on Equity (ROE) (GOOGL)

    Learn about Alphabet's return on equity. How has its ROE changed over time, how does it compare to its peers and what factors are driving ROE for the company?
  6. Investing News

    Is Buffett's Bet on Oil Right for You? (XOM, PSX)

    Oil stocks are getting trounced, but Warren Buffett still likes one of them. Should you follow the leader?
  7. Investing

    3 Things About International Investing and Currency

    As world monetary policy continues to diverge rocking bottom on interest rates while the Fed raises them, expect currencies to continue their bumpy ride.
  8. Investing News

    Chipotle Served with Criminal Probe

    Chipotle's beat muted expectations and got a clear bill from the CDC, but it now appears that an investigation into its E.coli breakout has expanded.
  9. Stock Analysis

    Analyzing Sprint Corp's Return on Equity (ROE) (S)

    Learn about Sprint's return on equity. Find out why its ROE is negative and how asset turnover and financial leverage impact ROE relative to Sprint's peers.
  10. Stock Analysis

    Why Alphabet is the Best of the 'FANGs' for 2016

    Alphabet just impressed the street, but is it the best FANG stock?
RELATED FAQS
  1. Should mutual funds be subject to more regulation?

    Mutual funds, when compared to other types of pooled investments such as hedge funds, have very strict regulations. In fact, ... Read Full Answer >>
  2. Do ETFs pay capital gains?

    Exchange-traded funds (ETFs) can generate capital gains that are transferred to shareholders, typically once a year, triggering ... Read Full Answer >>
  3. How do real estate hedge funds work?

    A hedge fund is a type of investment vehicle and business structure that aggregates capital from multiple investors and invests ... Read Full Answer >>
  4. Are Vanguard ETFs commission-free?

    While some Vanguard exchange-traded funds (ETFs) are available commission-free from third-party brokers, a large portion ... Read Full Answer >>
  5. Do Vanguard ETFs require a minimum investment?

    Vanguard completely waives any U.S. dollar minimum amounts to buy its exchange-traded funds (ETFs), and the minimum ETF investment ... Read Full Answer >>
  6. Can mutual fund expense ratios be negative?

    Mutual fund expense ratios cannot be negative. An expense ratio is the sum total of all fees charged by an asset management ... Read Full Answer >>
COMPANIES IN THIS ARTICLE
Trading Center