Spot the Next Outbreak of Material Madness

The stock still looks cheap, selling at a price-to-forward-earnings ratio that is half of the projected earnings growth rate. This low P/E ratio is just what you want to see when you look into prospective investments in cyclical stocks.

The second selection is Allegheny Technologies (ATI Quote). This $10 billion market-cap steel company also produces specialty materials including super stainless steel, nickel and titanium alloys. Last year, about 75% of sales came from the U.S. and 25% from a variety of international regions.

For next year, the earnings outlook is also very positive for ATI, with an $8.23 consensus earnings estimate for 2008. The stock set a new high in January when Allegheny announced that it had signed a long-term sourcing agreement with GE Aviation for the supply of premium titanium, nickel-based superalloy and vacuum-melted specialty alloy products for commercial and military jet engine applications. The total revenue of this agreement plus direct sales to GE Aviation for the period of 2007 through 2011 may exceed $2 billion.

The stock sells at an attractive 12.4 times forward earnings.

For those who can't get enough of titanium stocks, our model also points to the smaller $2 billion market cap RTI International Metals (RTI Quote) as being attractive.

But for our third selection, Vulcan Materials (VMC Quote), we are picking something more basic and defensive in nature. Vulcan produces, distributes and sells construction materials, including construction aggregates, asphalt and ready-mixed concrete.