Commodities & Metals
Merrill Lynch Lists Specialty Metals and Mining Stocks to Buy
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Last week Merrill Lynch hosted its 30th annual Metals and Mining conference in Barcelona Spain. While there was an overall positive tone at the conference, the big miners left investors more concerned with iron ore oversupply, despite less capital expenditure spending in general committed going forward. The good news is with the conference behind, negative sentiment also may be behind, and perhaps miners took away some of the concerns expressed by investors.
Strong attendance at Barcelona was a sign to the Merrill Lynch analysts that the sector is not dead, but risks after the Chinese-fueled commodity super cycle leave higher, fixed-cost producers vulnerable. They prefer stocks with some element of “self-help,” which they define as evidence the company is controlling its destiny beyond simply waiting around for improving market conditions. They used that criteria when creating their list of stocks to buy.
Nucor Corp. (NYSE: NU) leads off the list of stocks to buy at Merrill Lynch. Nucor, together with its subsidiaries, engages in the manufacture and sale of steel and steel products in North America and internationally. It operates through three segments: Steel Mills, Steel Products and Raw Materials. The Merrill Lynch price objective is $49. The Thomson/First Call consensus estimate is higher at $52. Investors are paid a solid 3.20% dividend.
Kaiser Aluminum Corp. (NASDAQ: KALU) is one of the top metals stock picks on Wall Street. When the company reported earnings last month, management was optimistic that 2013 revenues would exceed 2012. Merrill Lynch has a $72 price target. The consensus is at $74. The stock pays a 1.90% dividend.
Suncoke Energy Partners L.P. (NYSE: SXCP) has a large investor in Kayne Anderson Capital, which holds a 10.27% stake in the coking company. Merrill Lynch has a $24 target. The consensus target is at $22.50.
TMS International Corp. (NYSE: TMS) is a solid small-cap name to make the Merrill Lynch list of stocks to buy. It provides outsourced industrial services to steel mills in North America and internationally, and its earnings have been strong in the past two quarters. Merrill Lynch has a $16 price objective, and the consensus for the stock is at $16.50. Investors receive a 2.60% annual dividend.
Reliance Steel & Aluminum Co. (NYSE: RS) has provided investors with a solid 16.2% return, nearly three times that of the metal fabrication industry’s average over the past year. Merrill Lynch has a $70 price target. The consensus for the stock is at $71. Investors receive a 1.80% dividend.
Allegheny Technologies Inc. (NYSE: ATI) has benefited from the boom in hydraulic fracturing techniques used in unconventional oil and gas plays. Allegheny also recently bought its way into the aerospace industry, where it hopes to grow alongside global air traffic. While Merrill Lynch has a $46 target on the stock, the consensus target is much lower at $34.50. Shareholders are paid a 2.40% dividend. Merrill Lynch has the highest price target on the stock on Wall Street.
RTI International Metals Inc. (NYSE: RTI) produces and supplies titanium mill products worldwide and posted second-quarter revenues that were up 21%. Merrill Lynch has a $34 target. The consensus is higher at $35.
CONSOL Energy Inc. (NYSE: CNX) rounds out the list of specialty metals and mining stocks to buy. The company’s coal operations mine both thermal coal for power generation and metallurgical coal for use in the production of steel. CONSOL explores and produces natural gas in the Marcellus Shale and the Utica Shale. Merrill Lynch has a $36 price target, and the consensus for the stock is at $40. Investors receive a 1.50% dividend.
The companies to buy on the Merrill Lynch list have lagged some of the other sectors on Wall Street over the past year. A rebound in domestic and global growth over the next 12 to 18 months could provide the spark for this sector to become a market leader. Investors may want to take some profit on current winners and move some of the gains to specialty metals and mining names.
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