Best MaterialsStocks — Ranked by 5 Models

There are really two sectors hiding inside Materials, and they behave nothing alike. Specialty chemical companies like Linde and Sherwin-Williams have pricing power, stable margins, and predictable earnings. Commodity producers like Freeport-McMoRan and Newmont have earnings that can swing violently between cycle peaks and troughs — and their scores fluctuate with them.

Lynch treats the whole sector as cyclical, as One Up on Wall Street does for chemicals, paper, aluminium and steel: materials companies get no P/E-to-growth score, because a low P/E at the top of the cycle is exactly the trap he warned about. Graham's ten-year earnings record and Buffett's ten-year return tests do the rest of the work: a commodity producer that lost money in a downturn fails Graham's earnings record, and one whose returns collapsed in bad years fails Buffett's.

For the commodity side, the Timing axis is the most important signal on the page. A mining stock with a high value score and negative momentum is often a falling knife — commodity prices are still declining, and the "cheap" valuation can get cheaper. Timing is the lower of Value and Momentum, so it only rises once momentum recovers.

Specialty materials companies tend to show more stable returns and margins, which is what Buffett's moat signals in the numbers measure. They rarely look cheap on Graham's tests, but their Quality scores tend to be steadier than their commodity-producing peers'.