Primary parts

Businesses in the materials sector are involved with discovering, developing and processing raw materials that are used as inputs in various other products and services.

Stakeshop Pty Ltd (‘Stake’) (NZBN: 9429047452152) is a registered Financial Service Provider (No. FSP774414) and holds a licence to provide a financial advice service. Stake can provide you with financial advice in relation to shares and ETFs. Content in this blog may be considered financial advice. We do not take into account your personal objectives, circumstances or financial needs. Our financial advice should be used as part of your wider research. For more detailed financial advice, we recommend you consult a financial adviser.

Stake does not charge any amount related to giving financial advice, and no incentive or commission is received for recommending any financial products. If you do trade via Stake’s platform, certain fees will apply - see a list of Stake’s fees here. Stake is not aware of any conflict of interest. If this changes, we will inform you and take reasonable steps to ensure our advice is not materially influenced. Stake has not been subject to a reliability event. If you wish to make a complaint you can do so by contacting us at For further information, see our full Financial Advice Disclosure here.

The materials sector provides the foundation for a range of industries and products. Common activities by firms operating in the area are related to extracting, producing, processing and distributing raw materials. Businesses are often working with mining, chemicals, forestry, packaging, construction, and metals. 

Investors should note that the materials sector’s earnings are often tied to commodity prices, with the performances of stocks in this sector being linked to economic trends. For those looking for more stability and insulation against market cycles, shares in the consumer staples or utility industries could be better suited. 

Linde ($LIN)

Linde is an industrial gas and engineering firm that services a variety of end markets. One of their main activities is designing and constructing large chemical plants that cater to clients in both non-cyclical segments such as consumer and cyclical ones like industry with a relatively even split in their largest market of the North and South America. This diversification could suit investors looking for a less volatile option amongst material stocks. Investors wanting consistent dividends will also see Linde as good choice. 

Q3 2023 figures for sales, operating profits and income figures were within 1% of Q2 2023 results, while earnings per share grew from US$3.57 to US$3.63 over the same period. A 17% increase in operating cashflows could provide useful in the future, as Linde’s projects tend to require large upfront capital investments. The firm is pursuing new opportunities with hydrogen production, which could become significant sources of growth in the future, but come with higher technical risk than their traditional markets at this stage. 

Freeport McMoran ($FCX)

The mining company is a significant producer of copper and gold, with operations in the U.S., Peru, Chile and Indonesia. The global nature of the firm means that they are exposed to regulatory changes in various countries. The business is currently constructing a smelter in Indonesia due to the government’s push to bring the processing stage of the operations into the nation and capture more of the value chain. 

Freeport could benefit from increased demand for copper due to electrification trends and limited new projects coming online in the next few years. However, some investors view the lagging copper price as a signal for slowing economic sentiments in 2023. While the company also mines gold, which has a reputation as a safe haven asset, a majority of its sales come from copper. Q3 2023 saw copper sales exceed estimates to reach 1,109 million pounds, while gold number were below forecasts at 399 thousand ounces. 

CF Industries ($CF)

CF Industries is responsible for nitrogen and hydrogen products. The firm is the world’s largest producer of ammonia, which is predominantly used in fertilizers. Natural gas is a significant input into its products, which means that business is exposed to changes in this commodity’s price. The energy and fertilizer industries are affected by geopolitics, with the outbreak of the Russia-Ukraine conflict causing major disruptions for firms involved in the area.

As a supplier from outside the region, CF Industries saw increased demand from buyers looking to switch. H1 2023 net earnings were US$1.09b, a decline from US$2.05b for the same period in 2022. Investing in CF Industries is one way of accessing the increasing demand for food, as the world’s population grows and needs to produce more crops from limite farmland. However, this is a long term trend and on an annual basis their sales depend on agricultural seasons. 

Strong connections

There are several ETF options for investors who want to invest in the industrial sector generally, rather than looking for a specific stock. Vanguard Materials ETF ($VAW) is for investors looking to track 113 in the MSCI US IMI/Materials 25/20 Index, which contains large, medium and small cap firms. VAW has expense ratio of 0.10%, while the Fidelity MSCI Materials ETF ($FMAT) is a similar offering that could help investors save a small amount with fees of 0.084%. 

The Materials Select Sector SPDR ETF ($XLB) is better suited for those wanting to invest in large companies as it only includes the 29 materials stocks in the S&P 500 index as at the end of September 2023. Investors searching for a more active product can consider the Invesco DWA Basic Materials Momentum ETF ($PYZ). This ETF screens the NASDAQ US Benchmark Index to look for least 30 materials stocks that are showing relative momentum compared to others. 


Want more?

You know what to do

Insights, trends and company deep dives delivered straight to your inbox.

Stake logo
Over 7,000 5-star reviews
App Store logoGoogle Play logo

Subscribe to our free newsletters

By subscribing, you agree to our Privacy Policy.

Stakeshop Pty Ltd is registered as an overseas company in New Zealand (NZBN: 9429047452152), and is registered as a Financial Service Provider under the Financial Service Providers (Registration and Dispute Resolution) Act 2008 (No. FSP774414). We hold a full licence issued by the Financial Markets Authority to provide a financial advice service under the Financial Markets Conduct Act 2013. However, the content on this website has not been prepared to take into account any of your individual objectives, financial situation or needs. To the extent you require further information about the relevant New Zealand legislation that may apply, or require specific advice, please contact your legal and/or financial adviser (as appropriate). The information on our website or our mobile application is not intended to be an inducement, offer or solicitation to anyone in any jurisdiction in which Stake is not regulated or able to market its services. At Stake, we’re focused on giving you a better investing experience but we don’t take into account your personal objectives, circumstances or financial needs. Any advice is of a general nature only. As investments carry risk, before making any investment decision, please consider if it’s right for you and seek appropriate taxation and legal advice. Please view our Terms & Conditions, Privacy Policy, Financial Advice Disclosure and Disclaimers before deciding to use or invest on Stake. By using the Stake website or service in any way, you agree to our Privacy Policy and Terms & Conditions All financial products involve risk and you should ensure you understand the risks involved as certain financial products may not be suitable to everyone. Past performance of any product described on this website is not a reliable indication of future performance. Stake is a registered trademark under class 36 (New Zealand).

Copyright © 2024 Stake. All rights reserved.