Basic Materials are the Place to Be?

    In a week where all the three major averages dropped 2.5% and many good picks all of a sudden became bad, the Basic Materials sector was the strongest. After some analysis of the top industries over the past ten days, the Basic Materials sector stood out with industries like Cooper, Silver, Steel & Iron, Aluminum, Nonmetallic Mineral Mining and Gold being in the top 15 for the period.

    My best recommendations for the week where two put options, one in March Freddie Mac (FRE) puts and one in March Washington Mutual (WM) puts. And these could still hold up if the market continues to go down.

    But if the trend in Basic Materials stays stable or improves slightly, there are a few names that could appreciate. I like Silver Wheaton (SLW) which held up all week and looks good on the earnings front at this time. Also staying in the Silver area, I like the exchange traded fund the iShares Silver Trust (SLV). This ETF tracks the price of silver which is in a nice rally at the moment.

    In the Nonmetallic Mineral Mining industry, the top in market cap and performance is Potash Corp (POT), which sold off a little bit on Friday but for the week was only down 2.5 points. The earnings forecast for the stock is great but the chart has begun to turn down.

    Finally there is gold. I recommend the streetTracks Gold Shares (GLD) recently and still like using the ETF to stay in gold but not be exposed to a single stock. Goldcorp Inc (GG) held up this past week and their earnings going forward look ok, if you really want to be in a stock but that’s not a recommendation.