About the Book

This book’s goal is to help you gain a basic understanding of the Materials sector, its components, drivers, challenges, and history, as well as be a general guide to Materials investing success. Wherever possible, we’ll also help you think critically about the sector to generate your own views, rather than just dictating a bunch of rules. Successfully investing in Materials companies does not require a PhD in chemistry or geology. What is important is a firm grasp of the laws of supply and demand, and understanding what drives the earnings of stock prices of Materials companies.

Fisher Investments on Materials was written with the goal of helping investors make informed decisions in the Materials sector. Utilizing Fisher Investments’ top-down investing methodology, this book explores the challenges of investing in the Materials sector through detailed security analysis across all sub-industries. Similar to the other sector guides in the series, it will be structured with an introduction to the sector, a detailed breakdown of the sector’s structure and components, as well as a segment encouraging the reader to think like a portfolio manager.

Besides capital intensity, it’s crucial to remember economic growth is vital to Materials performance. The reason can be directly related to supply and demand. In the short term, supply of any material is relatively fixed because bringing a new mine online takes a lot of time and effort. Outside of unexpected supply disruptions (natural disasters, strikes, etc.), strong or weak demand is the biggest determinant in basic material prices (and therefore firm profitability) over short periods.

Most products coming from the Materials sector have extremely long useful lives. Once installed, it takes years for steel to corrode, cement to break down, or plastic to wear out. When archeologists discovered a copper plumbing system in the Egyptian pyramid of the Pharaoh Khufu, it was still in serviceable condition 5,000 years after construction! Absent economic growth, particularly in the construction and manufacturing industries, demand can drop considerably and be easily outstripped by existing supply.

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