3 Niche Stocks on the Rise: Why OC, LYB, and UAN Are Must-Buys
Investing in niche stocks can help unlock gains for your portfolio. These stocks often operate in specialized sectors or have unique business models that set them apart from mainstream companies.
Possibly carrying a higher risk due to their uniqueness, niche stocks can also play an important task in specialization that reduces the correlation of one’s overall portfolio to the broader indices.
So if you are looking for niche stocks that could surge in value, then read on. Let’s discuss three niche stocks to consider holding today.
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Owens Corning (OC)
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Owens Corning (NYSE:OC) manufactures insulation and roofing. Importantly, the housing and real estate market may be due for a correction due to the anticipated fall in interest rates next year. Therefore, many companies such as OC may be undervalued due to a depressed share price.
Additionally, OC stock has been growing its dividend and expanding its business operations. Recently, the company acquired Natural Polymers, manufacturer of spray polyurethane foam insulation.
Truly, this could be a wise move by Owen’s management team. Foam insulation and polyurethane products are higher margin segments, which could boost OC’s bottom line.
Also, it boosted its dividend per share, taking the dividend yield to 1.7%, in line with the industry average. Further, the dividend is well-covered by free cash flow. Also, its earnings potential is expected to be robust moving forward.
LyondellBasell (LYB)
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Next, LyondellBasell (NYSE:LYB) is a major player in the specialty chemicals industry. Another company focusing on higher margin segments of its business, which could lead to future great efficiencies.
But for LYB stock, the attention on divestments or selling off parts of itself aren’t part of its core mission. Recently, this was achieved via its sale of Bayport, Texas-based Ethylene Oxide & Derivatives (EO&D) business and production facility to INEOS Oxide for $700 million. The deal is due to be closed sometime in the second quarter of next year.
And, this $700 million cash injection is significant. Some of that money will be used to compensate shareholders for holding its stock. LYB pays a significant dividend, with a yield of 5.39%, and its dividend was also recently increased. This cash injection may help provide a solid buffer to ensure it can keep ticking over for years to come.
CVR Partners LP (UAN)
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CVR Partners LP (NYSE:UAN) specializes in producing and distributing nitrogen-based fertilizer products.
UAN has made an impressive financial turnaround, as seen in its most recent quarterly report. It reported income net of $1 million. That number marks an improvement from a net loss of $20 million in the same quarter of the previous year.
These results were made possible via solid execution from management and strong demand for fall ammonia application, which is part of UAN’s key operating segments.
Plenty of reasons exist for UAN stock to continue to deliver solid returns to investors. Its dividend yield of 9.59% and dividend growth of 37.78% year over year (YOY) positions it competitively toward its peers.
Also, UAN has a low number of shares outstanding of just 10.57M. This translates into a strong upside potential as fertilizer products continue to make its cyclical rotation.
On the date of publication, Matthew Farley did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Matthew started writing coverage of the financial markets during the crypto boom of 2017 and was also a team member of several fintech startups. He then started writing about Australian and U.S. equities for various publications. His work has appeared in MarketBeat, FXStreet, Cryptoslate, Seeking Alpha, and the New Scientist magazine, among others.
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