The coronavirus has been dominating headlines and investors’ minds lately, and has sent stocks reeling.
Last week, the Dow dropped -12.4% and the S&P 500 fell -11.5% putting both indexes into correction territory. And according to Dow Jones Market data, last week marked the fastest the S&P 500 has ever entered into correction territory from an all-time high.
The rout continued on Tuesday with all three major U.S. indexes dropping around -3%.
And while Wednesday saw a rebound as Wall Street cheered Joe Biden’s big wins on Super Tuesday, the move could very well prove to be a dead-cat bounce.
But as stocks have fallen, there are three materials stocks that analysts say have fallen to levels investors shouldn’t ignore.
Morgan Stanley analyst Carlos De Alba upgraded Brazilian iron ore miner Vale S.A. (NYSE: VALE) to a Buy, after having earlier suspended his rating on the stock as he weighed the potential liabilities from a 2019 dam collapse that killed 270 people.
De Alba wrote that Vale shares are now “too cheap to ignore,” after the stock had fallen more than -10% last week.
“We estimate Vale shares are now fully discounting all potential liabilities related to the Brumadinho dam collapse,” Alba wrote in a note to clients.
Since the January 2019 dam collapse, Vale has lost roughly $20 billion in market value with the stock down -30% since the accident.
De Alba has a price target on VALE shares of $13.50, indicating possible upside of 28% over the next twelve months.
Tanners upgraded both stocks from Hold to Buy this week after Vulcan dropped -7.5% and Martin Marietta fell -7.2% last week. The Bank of America analyst has a price target on Vulcan of $150 and on MLM of $280, suggesting upside of 11% and 10.8%, respectively.
Tanners noted that upside for these aggregate producers will come from increased spending on construction and infrastructure, and could see a boost from infrastructure rhetoric as the presidential campaign season heats up.
The Bank of America analyst also said that the first quarter is typically weak for aggregate companies like Vulcan and Martin Marietta given that less construction activity happens during the winter, which could prove to be a buffer to any earnings declines caused by the coronavirus outbreak.