Although the media’s attention is centered firmly on the output of the technology ecosystem, it may be prudent to consider the input. After all, every great work of art requires a canvas to provide the physical medium of expression. In this sense, investors should consider advanced materials stocks rather than only focusing on individual tech brands.
Please hear me out. I know this is the Internet so there’s always room for misinterpretation. I’m not suggesting that you abandon your approach to securing individual tech equities. Whether you’re into artificial intelligence or automated mobility or anything in between, there’s never been a better time to target the innovation industry.
Plus, the key advantage of going the indirect route is that investors don’t really know which specific company will succeed. However, all tech firms require advanced materials. Thus, while advanced materials stocks may be a boring idea, the concept is extremely relevant.
Honeywell (HON)
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One of the biggest advanced materials stocks in the world, Honeywell (NASDAQ:HON) offers a compelling long-term investment for your portfolio. Primarily, the enterprise develops materials used in a wide range of industrial applications. As well, it brings to the table physical solutions for the electronics and aerospace sectors. Its high-performance fibers offer much relevancy in specialized fields such as thermal management.
Financially, the industrial conglomerate isn’t exactly what you call an exciting play. However, it’s dependable and consistent. In the past four quarters, Honeywell posted an average earnings per share of $2.36. This figure beat the collective consensus view of $2.30, yielding an earnings surprise of 2.85%.
In the trailing 12 months (TTM), Honeywell posted EPS of $8.63 on sales of $36.9 billion. By the end of this year, analysts project that EPS may rise 11.57% to $10.22. On the top line, sales could see a bump of 5.7% to $38.74 billion. Similar expansion for the top and bottom lines is expected in fiscal 2025. Combined with a forward yield of 1.98%, Honeywell is a strong candidate for advanced materials stocks to buy.
Dow (DOW)
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A top-tier enterprise in the specialty chemicals industry, Dow (NYSE:DOW) engages in the provision of various materials science solutions. Its products cover the needs of multiple sectors, including packaging, infrastructure, mobility and consumer applications. DOW ranks as one of the most relevant advanced materials stocks for its high-performance silicones, acrylics and polyurethanes.
As with Honeywell above, Dow isn’t exactly an exciting financial prospect. However, where it shines for investors is in its consistency. During the past four quarters, the company posted an average EPS of 56 cents. In contrast, the collective consensus view sat at 50 cents. Therefore, the performance yielded an earnings surprise of 12.03%, which is impressive considering the slow-moving sector.
In the TTM period, Dow posted EPS of $1.68 on revenue of $43.45 billion. By year’s end, analysts anticipate a robust 30.36% expansion in the bottom line to $2.92 per share. On the top line, sales could dip slightly to $44.36 billion. However, the high-side estimate calls for growth of 2.64% to $45.8 billion.
The company provides a forward yield of 5.12%, making it an attractive idea for advanced materials stocks.
Albemarle (ALB)
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While an obvious idea for advanced materials stocks, Albemarle (NYSE:ALB) nevertheless deserves special attention. As one of the top producers of lithium, the company will almost surely play a significant role in the technologies of tomorrow. Lithium-ion batteries are indispensable when it comes to portable electronic products. As the nature of mobility shifts toward electric vehicles, the underlying asset will become even more highly demanded.
To be fair, ALB stock encountered some rough waters. Since the beginning of this year, shares have slumped more than 33%. In the past 52 weeks, they’re down nearly 59%. That said, some context is needed. In the past four quarters, the company posted EPS of $3.05. While not every quarter was a beat, the hits were so massive that the average beat the collective consensus view of $2.43.
Another factor to consider is the valuation. Right now, shares trade at 1.37X trailing-year sales. Between the first quarters of 2023 and 2024, this metric stood at 2.39X. To clarify, analysts do see a severe drop of 40% in sales to $5.79 billion this year. However, a recovery effort may start in fiscal 2025, when sales reach $6.86 billion.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
