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Six High-Beta Metals Stocks to Watch

The high-beta metals stocks have been lagging the S&P 500.

Six large cap metal stocks -- Teck Resources (TCK) , Century Aluminum (CENX) - Get Century Aluminum Company Report, Stillwater Mining (SWC) , ArcelorMittal (MT) - Get ArcelorMittal SA ADR Report, United States Steel (X) - Get United States Steel Corporation Report and Freeport-McMoRan Copper & Gold (FCX) - Get Freeport-McMoRan, Inc. (FCX) Report -- lost 11.3%, 4.8%, 3%, 12%, 5% and 3.8%, respectively during the week ended May14. In comparison, the S&P 500 fell 2.1% on rising euro zone concerns.

We note that this excessive decline stems from the fact these stocks are high-beta stocks having a beta of 2.15, 2.80, 1.84, 1.66, 1.60 and 1.43, respectively. A high-beta stock increases or decreases (in percentage terms) more than the index.

This has been the trend for close to a month now. In the last one month or so, the S&P 500 has declined about 7%. In contrast, these stocks have declined anywhere between 10% and 23%, with Teck Resources and ArcelorMittal being the worst performers.

During the last week, UBS rated Teck Resources buy with a price target of $53.65, while Cormark Securities rated U.S. Steel sell with a price target of $40.

These stocks will only post a comeback if markets move up. We forecast a positive outlook for markets this week, primarily due to positive data releases/events coming up.

The data release from the U.S., includes Empire State Manufacturing, net long-term tic inflows, housing starts, building permits, consumer price index (CPI), leading indicators, initial jobless claims, and continuing claims.

As per the Bloomberg expectations, a few data suggest improvement from the prior levels and thus would help to boost the markets as well as the metals pack, while others might be disconcerting.

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According to the survey, net long term Treasury International Capital (TIC) inflows for March month are expected to improve to $50 billion as against $47.10 billion recorded during February. Housing starts are forecasted to record a month-over-month jump of 3.80% in April compared with a 1.60% increase in March.

Initial jobless claims are expected to come down by 4,000 week over week to 440,000, compared with 444,000 a week earlier. Moreover, continuing claims for the week ended May 8 are estimated to fall by approximately 20,000 to 4.61 million from 4.63 million.

In a regulatory filing with the

Securities and Exchange Commission

, Singapore state investor

Temasek

revealed that it bought 382,000 shares in Freeport-McMoRan Copper & Gold. The stake is valued at $27 million based on Freeport's Friday's closing price of $69.72.

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