3 stocks with huge long-term potential
Global ripples, including the conflict in Ukraine, are creating near-term pressure on various commodities and materials. However, investors shouldn’t view them as just short-term problems that might go away. Instead, the world is likely to fundamentally rethink who buys what and from whom.
Therefore, it makes sense to consider which businesses might be affected by the potential change in demand patterns. In this context, copper miner Freeport-McMoRan ( FCX -1.66% )steelmaker Nucor (NUDE 2.32% )and a US-listed South African precious metals miner Sibanye Stillwater ( SSBSW -3.26% ) worth the detour. Here’s why.
Freeport-McMoRan, the best copper stock
It is no secret that the conflict in Ukraine has caused industrial metal prices to skyrocket and has also driven up the price of gold as investors seek out so-called safe-haven investments. Freeport-McMoran is primarily a copper miner (3.8 billion pounds by volume in 2021), and it also has gold mining assets (1.4 million ounces).
However, Freeport-McMoRan is much more than a short-term tactical game to protect your portfolio. It will take time for the global economy to adjust to the consequences of the war. Ukraine is a major producer of copper wire harnesses, and the lack of production due to the dispute has already caused automakers to halt production. Therefore, alternative producers will have to source more copper.
Meanwhile, the long-term case for the stock rests on increased demand for copper resulting from the transition to electric vehicles and renewable energy. At the same time, global supply could be constrained due to the difficulty of obtaining permits and political developments in Peru and Chile. Meanwhile, Freeport-McMoRan is well positioned with significant producing assets in Indonesia and the United States.
Sibanye Stillwater, a speculative stock on precious metals
Certainly one for the more speculative investor, this South African precious metals miner produces platinum, palladium, rhodium, other metals and gold. Russia produces around 40% of the world’s palladium, with South Africa the only other major producer with a similar market share. Palladium is an essential metal used in the semiconductor industry and, more importantly, is an element of catalytic converters in vehicles.
Therefore, there are fears that possible supply constraints and soaring prices could lead to production cuts at automakers. However, there is every reason to believe that South African palladium will benefit from increased demand in the future. This would be good news for Sibanye Stillwater.
Nevertheless, potential investors should note that the miner is based in South Africa and suffers from a recent history of labor disputes, difficult union relations and strikes. As such, there are a lot of stock-specific risks around this company. However, assuming management can sort out its labor issues, the combination of upside potential from increased demand for precious metals and the stock’s 8.3% dividend yield makes it attractive now.
Nucor, a leading steel stock
The onset of the war sent steel prices soaring, benefiting steelmaker Nucor in 2022. Both Russia and Ukraine are major steel exporters. Russia faces harsh sanctions and economic isolation, while Ukraine has seen damage to one of Europe’s largest steel mills.
This is not the place to speculate on what might happen next – suffice it to say that ongoing global geopolitical pressures and uncertainty could create favorable conditions for Nucor. The American steel company has operating facilities in the United States, Canada and Mexico. If there is an increase in protectionist tensions resulting from the conflict, then Nucor is likely to be the beneficiary.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a high-end consulting service Motley Fool. We are heterogeneous! Challenging an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and wealthier.