9 Best Basic Materials Moat Stocks for December 2025
Welcome to the Value Sense Blog, your resource for insights on the stock market! At Value Sense, we focus on intrinsic value tools and offer stock ideas with undervalued companies. Dive into our research products and learn more about our unique approach at valuesense.io
Explore diverse stock ideas covering technology, healthcare, and commodities sectors. Our insights are crafted to help investors spot opportunities in undervalued growth stocks, enhancing potential returns. Visit us to see evaluations and in-depth market research.
Market Overview & Selection Criteria
The commodities and basic materials sector has emerged as a compelling opportunity for value-focused investors seeking exposure to undervalued assets with strong cash generation potential[1]. This curated collection represents companies spanning precious metals mining, industrial minerals, and specialty materials—sectors that benefit from both cyclical demand recovery and structural supply constraints.
Our selection methodology prioritizes companies demonstrating strong free cash flow generation, quality ratings above 6.4, and intrinsic value premiums relative to current market prices. We've focused on businesses with gross margins exceeding 43% and return on invested capital (ROIC) above 14%, indicating operational efficiency and capital allocation discipline. These metrics help identify businesses capable of weathering commodity price volatility while rewarding shareholders through dividends and buybacks.
The featured stocks span large-cap diversified miners, pure-play precious metals producers, and specialized materials companies—providing portfolio construction flexibility for different risk tolerances and investment horizons.
Featured Stock Analysis
Stock #1: BHP Group Limited (BHP)
| Metric | Value |
|---|---|
| Market Cap | $139.2B |
| Quality Rating | 6.4 |
| Intrinsic Value | $60.9 |
| 1Y Return | 6.0% |
| Revenue | $107.3B |
| Free Cash Flow | $20.7B |
| Revenue Growth | (10.1%) |
| FCF margin | 19.3% |
| Gross margin | 48.7% |
| ROIC | 28.5% |
| Total Debt to Equity | 46.9% |
Investment Thesis
BHP Group Limited stands as one of the world's largest diversified mining companies, with a market capitalization of $139.2 billion and annual revenues of $107.3 billion. The company operates across iron ore, copper, coal, and petroleum segments, providing exposure to multiple commodity cycles simultaneously. With a quality rating of 6.4 and an intrinsic value of $60.9, BHP offers investors a globally diversified platform with substantial free cash flow generation capabilities.
The company's $20.7 billion in annual free cash flow and 19.3% FCF margin demonstrate exceptional capital efficiency, even amid cyclical commodity headwinds. BHP's 48.7% gross margin reflects pricing power and operational scale advantages that smaller competitors cannot match. The 1-year return of 6.0% suggests the market has undervalued the company's cash generation potential relative to its intrinsic value estimate.
Key Catalysts
- Copper demand recovery driven by renewable energy infrastructure buildout and electrification trends
- Iron ore price stabilization supporting cash flow generation
- Dividend sustainability backed by fortress balance sheet and strong FCF
- Potential portfolio optimization and capital returns to shareholders
- Exposure to long-cycle commodity recovery
Risk Factors
- Commodity price volatility affecting revenue and profitability
- Debt-to-equity ratio of 46.9% requires monitoring during downturns
- Regulatory and environmental compliance costs in multiple jurisdictions
- Geopolitical risks across global mining operations
- Capital intensity of mining operations limiting flexibility
Stock #2: Southern Copper Corporation (SCCO)
| Metric | Value |
|---|---|
| Market Cap | $111.2B |
| Quality Rating | 8.2 |
| Intrinsic Value | $62.4 |
| 1Y Return | 36.3% |
| Revenue | $12.3B |
| Free Cash Flow | $3,829.5M |
| Revenue Growth | 12.7% |
| FCF margin | 31.0% |
| Gross margin | 53.2% |
| ROIC | 31.4% |
| Total Debt to Equity | 69.9% |
Investment Thesis
Southern Copper Corporation represents a pure-play copper exposure with a $111.2 billion market cap and impressive operational metrics. The company's quality rating of 8.2—the highest among diversified miners in this collection—reflects superior operational execution and capital discipline. With an intrinsic value of $62.4 and a 1-year return of 36.3%, SCCO has begun capturing market recognition for its cash generation prowess.
The company's 31.0% FCF margin and 53.2% gross margin stand among the best in the mining sector, indicating world-class operational efficiency and pricing power. Annual revenues of $12.3 billion generate $3.83 billion in free cash flow, providing substantial capital for shareholder returns and reinvestment. SCCO's exposure to copper—a critical metal for electrification and renewable energy infrastructure—positions the company to benefit from multi-decade structural demand growth.
Key Catalysts
- Copper supply deficit as mine depletion outpaces new discoveries
- Renewable energy transition driving copper demand for grid infrastructure
- Strong free cash flow enabling consistent dividend growth
- Potential for special dividends during commodity price peaks
- Operational leverage to copper price appreciation
Risk Factors
- Elevated debt-to-equity ratio of 69.9% increases financial risk during commodity downturns
- Copper price volatility directly impacts profitability
- Concentration risk in single commodity exposure
- Geopolitical risks in Peru and Mexico operations
- Environmental and labor cost pressures in Latin America
Stock #3: Newmont Corporation (NEM)
| Metric | Value |
|---|---|
| Market Cap | $99.8B |
| Quality Rating | 7.6 |
| Intrinsic Value | $81.0 |
| 1Y Return | 117.6% |
| Revenue | $21.3B |
| Free Cash Flow | $6,122.0M |
| Revenue Growth | 26.0% |
| FCF margin | 28.8% |
| Gross margin | 45.6% |
| ROIC | 14.9% |
| Total Debt to Equity | 16.9% |
Investment Thesis
Newmont Corporation, the world's largest gold producer, commands a $99.8 billion market cap with $21.3 billion in annual revenues. The company's quality rating of 7.6 and intrinsic value of $81.0 reflect a fortress balance sheet combined with exceptional cash generation. The remarkable 1-year return of 117.6% demonstrates how significantly the market has repriced gold mining equities as investors recognize inflation hedging and geopolitical risk premium value.
Newmont's $6.12 billion in annual free cash flow and 28.8% FCF margin provide substantial resources for shareholder distributions and strategic acquisitions. The company's 45.6% gross margin and 14.9% ROIC indicate efficient operations, while a conservative 16.9% debt-to-equity ratio provides financial flexibility. Gold's role as a portfolio diversifier and inflation hedge has driven renewed investor interest in quality producers like Newmont.
Key Catalysts
- Gold price appreciation driven by geopolitical uncertainty and inflation concerns
- Central bank gold accumulation supporting structural demand
- Dividend growth potential from strong free cash flow
- Strategic acquisition opportunities in consolidating industry
- Operational efficiency improvements from recent acquisitions
Risk Factors
- Gold price volatility affecting earnings and cash flow
- Regulatory and permitting delays for new mine development
- Labor cost inflation in mining operations
- Environmental remediation liabilities
- Currency fluctuations in international operations
Stock #4: Gold Fields Limited (GFI)
| Metric | Value |
|---|---|
| Market Cap | $37.7B |
| Quality Rating | 8.0 |
| Intrinsic Value | $37.0 |
| 1Y Return | 196.0% |
| Revenue | $10.9B |
| Free Cash Flow | $2,046.4M |
| Revenue Growth | 24.6% |
| FCF margin | 18.7% |
| Gross margin | 43.1% |
| ROIC | 42.7% |
| Total Debt to Equity | 40.9% |
Investment Thesis
Gold Fields Limited operates as a mid-tier gold producer with a $37.7 billion market cap and $10.9 billion in annual revenues. The company's quality rating of 8.0 and intrinsic value of $37.0 reflect operational excellence and disciplined capital allocation. The extraordinary 1-year return of 196.0% highlights the market's recognition of gold mining value as precious metals have appreciated significantly.
The company's $2.05 billion in annual free cash flow and 18.7% FCF margin support consistent shareholder returns, while a 43.1% gross margin demonstrates pricing power. Most impressively, Gold Fields' 42.7% ROIC ranks among the highest in the mining sector, indicating exceptional capital efficiency and management quality. The company's 40.9% debt-to-equity ratio remains manageable, providing balance sheet flexibility.
Key Catalysts
- Gold price strength supporting margin expansion
- Production growth from development projects coming online
- Dividend sustainability and potential increases
- Operational leverage to gold price appreciation
- Strategic positioning in African mining operations
Risk Factors
- Gold price volatility and potential correction risk
- Geopolitical risks in African operations
- Regulatory and permitting uncertainties
- Labor relations and wage inflation pressures
- Commodity price cyclicality affecting valuations
Stock #5: AngloGold Ashanti Limited (AU)
| Metric | Value |
|---|---|
| Market Cap | $35.5B |
| Quality Rating | 8.3 |
| Intrinsic Value | $150.1 |
| 1Y Return | 243.5% |
| Revenue | $8,575.0M |
| Free Cash Flow | $2,524.0M |
| Revenue Growth | 11.1% |
| FCF margin | 29.4% |
| Gross margin | 45.9% |
| ROIC | 26.2% |
| Total Debt to Equity | 24.2% |
Investment Thesis
AngloGold Ashanti Limited represents a globally diversified gold producer with a $35.5 billion market cap and $8.58 billion in annual revenues. The company's quality rating of 8.3—the highest among precious metals producers in this collection—reflects superior operational execution and strategic positioning. With an intrinsic value of $150.1 and a stunning 1-year return of 243.5%, AU has delivered exceptional returns as the gold market has recognized the value proposition of quality producers.
The company's 29.4% FCF margin and 45.9% gross margin demonstrate operational excellence, while $2.52 billion in annual free cash flow provides substantial capital for shareholder returns. AngloGold's 26.2% ROIC and conservative 24.2% debt-to-equity ratio indicate disciplined capital allocation and financial strength. The company's geographic diversification across Africa, Australia, and the Americas reduces single-jurisdiction risk.
Key Catalysts
- Gold price appreciation benefiting high-quality producers
- Dividend growth from strong free cash flow generation
- Production growth from development projects
- Operational efficiency improvements
- Potential for special dividends during commodity peaks
Risk Factors
- Gold price volatility and potential mean reversion
- Geopolitical risks across multiple jurisdictions
- Regulatory and environmental compliance costs
- Labor relations and wage inflation
- Currency fluctuations affecting international operations
Stock #6: Kinross Gold Corporation (KGC)
| Metric | Value |
|---|---|
| Market Cap | $34.6B |
| Quality Rating | 7.9 |
| Intrinsic Value | $19.6 |
| 1Y Return | 190.4% |
| Revenue | $6,423.9M |
| Free Cash Flow | $2,196.7M |
| Revenue Growth | 31.8% |
| FCF margin | 34.2% |
| Gross margin | 50.4% |
| ROIC | 21.1% |
| Total Debt to Equity | 15.6% |
Investment Thesis
Kinross Gold Corporation operates as a mid-tier gold producer with a $34.6 billion market cap and $6.42 billion in annual revenues. The company's quality rating of 7.9 and intrinsic value of $19.6 reflect solid operational performance and capital discipline. The 1-year return of 190.4% demonstrates how significantly the market has repriced gold mining equities as investors recognize the sector's value.
Kinross stands out for its exceptional 34.2% FCF margin and 50.4% gross margin, indicating world-class operational efficiency and pricing power. The company's $2.20 billion in annual free cash flow supports consistent shareholder distributions, while a conservative 15.6% debt-to-equity ratio provides financial flexibility. The 31.8% revenue growth reflects both organic production increases and the benefit of higher gold prices.
Key Catalysts
- Gold price strength driving margin expansion
- Production growth from development projects
- Dividend growth potential from strong cash generation
- Operational leverage to precious metals prices
- Strategic positioning in quality mining jurisdictions
Risk Factors
- Gold price volatility affecting profitability
- Commodity price cyclicality and mean reversion risk
- Geopolitical risks in operating jurisdictions
- Regulatory and permitting uncertainties
- Labor cost inflation pressures
Most investors waste time on the wrong metrics. We've spent 10,000+ hours perfecting our value investing engine to find what actually matters.
Want to see what we'll uncover next - before everyone else does?
Find Hidden Gems First!
Stock #7: Royal Gold, Inc. (RGLD)
| Metric | Value |
|---|---|
| Market Cap | $13.3B |
| Quality Rating | 7.6 |
| Intrinsic Value | $91.7 |
| 1Y Return | 39.8% |
| Revenue | $855.9M |
| Free Cash Flow | $557.3M |
| Revenue Growth | 27.8% |
| FCF margin | 65.1% |
| Gross margin | 53.9% |
| ROIC | 29.3% |
| Total Debt to Equity | 22.5% |
Investment Thesis
Royal Gold, Inc. operates a unique business model as a precious metals royalty and streaming company with a $13.3 billion market cap and $855.9 million in annual revenues. The company's quality rating of 7.6 and intrinsic value of $91.7 reflect the attractive economics of the royalty model. The 1-year return of 39.8% demonstrates steady appreciation as investors recognize the leverage to gold and silver prices without direct mining operational risk.
Royal Gold's exceptional 65.1% FCF margin and 53.9% gross margin highlight the superior economics of the royalty business model, which generates cash without the capital intensity of mining operations. The company's $557.3 million in annual free cash flow supports consistent dividend growth, while a conservative 22.5% debt-to-equity ratio provides financial strength. The 27.8% revenue growth reflects both organic production increases and the benefit of higher precious metals prices.
Key Catalysts
- Gold and silver price appreciation driving royalty cash flows
- Dividend growth from strong free cash flow generation
- Potential for special dividends during commodity peaks
- Operational leverage to precious metals prices without mining risk
- Acquisition opportunities to expand royalty portfolio
Risk Factors
- Precious metals price volatility affecting cash flows
- Counterparty risk if mining companies underperform
- Commodity price cyclicality and potential correction
- Concentration risk in precious metals exposure
- Limited control over underlying mining operations
Stock #8: United States Lime & Minerals, Inc. (USLM)
| Metric | Value |
|---|---|
| Market Cap | $3,446.7M |
| Quality Rating | 8.0 |
| Intrinsic Value | $63.5 |
| 1Y Return | -20.5% |
| Revenue | $364.8M |
| Free Cash Flow | $104.2M |
| Revenue Growth | 20.3% |
| FCF margin | 28.6% |
| Gross margin | 48.1% |
| ROIC | 26.6% |
| Total Debt to Equity | 0.7% |
Investment Thesis
United States Lime & Minerals, Inc. represents a specialized industrial minerals producer with a $3.45 billion market cap and $364.8 million in annual revenues. The company's quality rating of 8.0 and intrinsic value of $63.5 reflect operational excellence in a less-followed niche market. The 1-year return of -20.5% suggests potential undervaluation as the market has overlooked the company's strong fundamentals and cash generation.
USLM stands out for its fortress balance sheet with a 0.7% debt-to-equity ratio—the strongest in this collection—providing exceptional financial flexibility. The company's 28.6% FCF margin and 48.1% gross margin demonstrate pricing power in industrial minerals, while $104.2 million in annual free cash flow supports shareholder returns. The 20.3% revenue growth reflects strong demand for lime and minerals in construction, steel, and environmental applications.
Key Catalysts
- Infrastructure spending supporting lime and minerals demand
- Pricing power in essential industrial minerals
- Strong balance sheet enabling strategic investments
- Dividend growth potential from free cash flow
- Operational efficiency improvements
Risk Factors
- Cyclical demand tied to construction and industrial activity
- Commodity price volatility affecting margins
- Transportation and logistics cost inflation
- Regional economic slowdown impacting demand
- Limited geographic diversification
Stock #9: TMC the metals company Inc. (TMC)
| Metric | Value |
|---|---|
| Market Cap | $2,442.0M |
| Quality Rating | 6.4 |
| Intrinsic Value | $3.2 |
| 1Y Return | 720.8% |
| Revenue | ($20.2M) |
| Free Cash Flow | ($45.0M) |
| Revenue Growth | N/A |
| FCF margin | 222.9% |
| Gross margin | 300.5% |
| ROIC | 103.7% |
| Total Debt to Equity | 0.0% |
Investment Thesis
TMC the metals company Inc. represents a speculative deep-sea polymetallic nodule mining venture with a $2.44 billion market cap. The company's quality rating of 6.4 reflects the early-stage, pre-revenue nature of the business. The extraordinary 1-year return of 720.8% demonstrates the speculative appeal of exposure to emerging battery metal supply solutions, though investors should recognize the substantial execution and regulatory risks inherent in this venture.
TMC operates in a nascent industry focused on harvesting polymetallic nodules from the ocean floor to supply critical battery metals including nickel, cobalt, and manganese. The company's negative revenues of -$20.2 million reflect pre-commercial development stage, while the 0.0% debt-to-equity ratio indicates the company is funded through equity capital. This represents a high-risk, high-reward opportunity for investors seeking exposure to battery metal supply innovation.
Key Catalysts
- Regulatory approval for deep-sea mining operations
- Battery metal supply constraints supporting project economics
- Electric vehicle demand driving critical mineral requirements
- Potential partnerships with battery manufacturers or miners
- Technology validation and commercialization progress
Risk Factors
- Regulatory uncertainty regarding deep-sea mining approval
- Environmental concerns and potential opposition
- Technology execution risk and unproven commercial viability
- Commodity price volatility affecting project economics
- Geopolitical risks and international regulatory frameworks
- Substantial capital requirements for commercialization
- Pre-revenue stage with no guarantee of profitability
Portfolio Diversification Insights
This collection of eight stocks provides meaningful diversification across the commodities and materials sector while maintaining focus on value and cash generation. The portfolio spans three distinct sub-sectors: diversified mining (BHP, SCCO), precious metals mining (NEM, GFI, AU, KGC), royalty/streaming (RGLD), industrial minerals (USLM), and emerging battery metals (TMC).
Sector allocation reflects the current investment opportunity set, with precious metals representing the largest exposure (50% of the collection by company count) given the sector's valuation attractiveness and macroeconomic tailwinds. Diversified miners 25% provide exposure to multiple commodity cycles, while industrial minerals and emerging technologies 25% offer portfolio balance and growth optionality.
Quality distribution ranges from 6.4 to 8.3, with the median quality rating of 7.9 indicating a portfolio of operationally sound businesses. The collection includes both established, cash-generative businesses (BHP, NEM, SCCO) and higher-growth, earlier-stage opportunities (TMC), enabling investors to construct portfolios aligned with their risk tolerance and investment horizon.
Cash flow characteristics demonstrate the portfolio's income-generation potential, with combined annual free cash flow exceeding $37 billion across the eight companies. This substantial cash generation supports dividend payments, share buybacks, and strategic investments, providing multiple paths to shareholder value creation.
Market Timing & Entry Strategies
Commodity cycle positioning suggests the current environment presents attractive entry points for value-focused investors. Precious metals have appreciated significantly, but quality producers trading near intrinsic value offer reasonable risk-reward profiles for long-term investors seeking inflation hedges and portfolio diversification.
Dollar-cost averaging represents an effective strategy for building positions in cyclical commodities stocks, reducing the impact of short-term price volatility. Investors might consider initiating positions with 25-33% of intended allocation, then adding to positions on weakness or as catalysts develop.
Valuation-based entry points suggest considering larger positions when stocks trade at discounts to intrinsic value. The collection includes several names trading near or below intrinsic value estimates, potentially offering attractive risk-reward profiles for patient capital.
Catalyst-driven timing should focus on commodity price trends, central bank policy, geopolitical developments, and company-specific operational milestones. Investors should monitor gold and copper prices, as these commodities drive the majority of portfolio returns.
Explore More Investment Opportunities
For investors seeking undervalued companies with high fundamental quality, our analytics team provides curated stock lists:
📌 50 Undervalued Stocks (Best overall value plays for 2025)
📌 50 Undervalued Dividend Stocks (For income-focused investors)
📌 50 Undervalued Growth Stocks (High-growth potential with strong fundamentals)
🔍 Check out these stocks on the Value Sense platform for free!
More Articles You Might Like
- How VKTX (Viking Therapeutics) Makes Money in 2025: A Deep-Dive With Income Statement
- How NET (Cloudflare) Makes Money in 2025: A Deep-Dive With Income Statement
- How MASS (908 Devices) Makes Money in 2025: A Deep-Dive With Income Statement
- How CRVO (CervoMed) Makes Money in 2025: A Deep-Dive With Income Statement
- How GILD (Gilead Sciences) Makes Money in 2025: A Deep-Dive With Income Statement
FAQ Section
Q1: How were these stocks selected for this watchlist?
These eight stocks were selected based on ValueSense's proprietary quality rating system, free cash flow generation metrics, and intrinsic value analysis. We prioritized companies demonstrating strong gross margins (43%+), solid ROIC (14%+), and sustainable free cash flow generation. The collection spans diversified miners, precious metals producers, royalty companies, and emerging battery metal opportunities, providing portfolio construction flexibility across different risk profiles and investment horizons.
Q2: Which stock from this list offers the best value opportunity?
Based on current valuations relative to intrinsic value estimates, AngloGold Ashanti (AU) and Kinross Gold (KGC) appear particularly attractive for value investors. Both companies feature quality ratings above 7.9, strong free cash flow generation, and conservative balance sheets. However, "best" depends on individual risk tolerance—conservative investors might prefer BHP or NEM, while growth-oriented investors might consider SCCO or RGLD. TMC represents a speculative opportunity for investors with higher risk tolerance seeking battery metal exposure.
Q3: Should I buy all these stocks or focus on a subset?
Portfolio construction depends on your investment objectives, risk tolerance, and time horizon. Conservative investors might focus on the top three (BHP, SCCO, NEM) for diversified exposure to mining and precious metals with established cash flows. Growth-oriented investors might emphasize SCCO, AU, and KGC for higher-growth profiles. Income-focused investors should consider RGLD and USLM for their strong free cash flow margins. TMC should represent only a small portfolio allocation given its speculative nature.
Q4: What are the biggest risks with these stock picks?
The primary risk across this portfolio is commodity price volatility—gold, copper, and other metals prices directly impact profitability and cash flow. Secondary risks include geopolitical uncertainties in mining jurisdictions, regulatory and permitting delays, and labor cost inflation. SCCO carries elevated financial leverage (69.9% debt-to-equity), while TMC faces regulatory uncertainty regarding deep-sea mining approval. Investors should monitor central bank policy, currency fluctuations, and macroeconomic indicators affecting commodity demand.
Q5: When is the best time to invest in these stocks?
Timing commodity stocks effectively requires monitoring gold and copper price trends, central bank policy, and macroeconomic indicators. Current valuations suggest attractive entry points for patient, long-term investors, particularly for quality producers trading near intrinsic value. Dollar-cost averaging over 3-6 months reduces timing risk. Watch for weakness in precious metals prices as potential buying opportunities, and monitor copper supply dynamics for SCCO and diversified miners. Consider building positions gradually rather than deploying capital all at once in cyclical commodities stocks.