Why New Tariffs Could Boost These 3 Basic Materials Stocks

Key Points

• Recent attention has focused on basic material stocks, which can be attributed to President Trump's latest round of trade tariffs.
• Wall Street analysts keep a double-digit upside outlook in these names on the back of this broader theme.
• Institutional capital has started to buy aggressively in these stocks over the past month to back this view.

If price action is any indication of what the market is thinking, investors can check the stocks that led the industry over the past week. The industry has seen a spike in volatility as a result of President Trump's latest round of tariffs. With this in mind, the market has figured out the potential effect of these tariffs.

By boosting some specific stocks in the basic materials industry, the market’s take on tariffs is that they might be a net positive overall in the coming months for this industry. By spotting some of the best-performing stocks in this weekly breakout, investors can align themselves and their portfolios to potential upside while everyone else scrambles to find safety and stability in the market.

Knowing this, today’s list is going to be important to keep handy in the following days as more tariff talks are made with China and potentially Europe. Starting with Albemarle Co. NYSE: ALB to give investors a chance to tap into aggressive earnings growth, then there is Alcoa Co. NYSE: AA, which is also drawing some attention from Wall Street analysts lately for decent upside, and finally, AngloGold Ashanti NYSE: AU, which is thriving on gold’s new all-time high prices.

Albemarle Stock’s EPS Growth Is Underrated

Trading at only 56% of its 52-week high, Albemarle has now fallen to an undeniable discount for investors to take advantage of today. The reason for this fantastic risk-to-reward ratio comes not only from the stock’s low price relative to 52-week highs but also because of where Wall Street analysts think underlying earnings per share (EPS) can go.

For the next financial quarter, analysts forecast up to $1.03 in EPS, a massive jump from the current quarter’s $0.04. Knowing that EPS growth typically drives stock prices, investors can safely assume that today’s consensus price target of only $113.9 a share for Albemarle stock, calling for a 42.5% upside from today’s prices, does not reflect true earnings growth.

This discrepancy between growth and valuations could explain why Clifford Swan Investment Counsel decided to boost its holdings in Albemarle stock by 1% as of February 2025. While this addition may not seem like much on a percentage basis, it did bring the group’s net position to a high of $10.8 million today.

Taking this as another bullish gauge, investors can see how this stock can be a great addition to a new tariff regime.

Analysts Like Alcoa Stock Now

As primary metals delivered the second consecutive month of expansion in the latest manufacturing PMI data, this new demand seems to be tied to the fact that the automotive industry’s supply chain will change in composition, as Mexico’s imports will become more expensive for domestic automakers.

Because of this, investors can understand the 6.4% decline in shares of Ford Motor NYSE: F after the company announced lower demand outlooks in its recent quarterly earnings report. This is where Alcoa's stock comes into play, as its aluminum will be called on to support the domestic capacity and supply chain for automakers.

It would be no surprise to see analysts from Bank of America initiate their coverage of Alcoa stock with a buy rating as of late January 2025. More than that, their valuations are now set at a high of $58 a share, which calls for a new 52-week high in the stock and a net upside of 60.2% from where it trades today.

Understanding that the upside potential is attractive enough at today’s low level of 76% of its 52-week high, the Bank of New York Mellon became a buyer as of February 2025 by boosting its position to a net high of $96.4 million in Alcoa stock.

Short Sellers Give Up After Gold’s New Run

Now that gold prices have recently reached an all-time high, it has become a painful truth to short sellers that they might have been betting on the wrong side of the market. This is why investors can see a net 13% decline in AngloGold’s short interest over the past month alone, a clear sign of bearish capitulation.

To replace these short sellers who were leaving their positions behind, the Bank of New York Mellon decided to expand their buying activity to include more than just Alcoa stock.

As of February 2025, they boosted their holdings in AngloGold by 9.9% to bring their net position to a high of $13.8 million, another bullish gauge on the broader theme helping the sector.

By trading at 96% of its 52-week high today and delivering a one-year performance of up to 74.2%, AngloGold stock is now the perfect stock to keep momentum investors happy, especially as the broader tailwinds keep building on stronger in the basic materials space.