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If you’re looking for a metals play, consider a highly coveted commodity that investors sometimes ignore: titanium. Accelerating demand for titanium in key economic sectors indicates that this versatile and ultra-strong metal will exhibit the true Midas touch.

Exchange-traded funds invested in metals also include more volatile holdings such as gold, so the purest play on rising titanium demand is the stock of the best-positioned producer.

The titanium stock with the most luster now is ATI (NYSE: ATI), which produces and sells specialty metals worldwide. In addition to titanium, ATI also provides alloys made of cobalt, nickel, zirconium, and other materials crucial for a host of industries.

ATI was formerly known as Allegheny Technologies, but in 2022 the company changed its name to ATI and moved from Pittsburgh to Dallas, further evidence of the economic ascendancy of the sunbelt.

This metals producer is poised to benefit from the eventual rebound in global economic growth, bigger aerospace/defense budgets, and ambitious infrastructure projects. The stock is an inflation hedge, to boot.

The most powerful tailwind for ATI is the vast increase in global military budgets, triggered by the Russia-Ukraine war and increasing rivalry among superpowers, especially China versus the United States.

ATI is a major player in a highly consolidated industry, giving it considerable pricing power in the current inflationary environment.

The company not only dominates the market in titanium, but recent soft demand due to the lingering pandemic and restrictive monetary policies has left its stock at a bargain price, just as the company’s customers are beginning to clamor for more of the silvery metal.

A surge in titanium demand is predicted in 2023 and beyond, as governments around the world push infrastructure projects to stimulate their economies and make long-deferred repairs. Commodities such as titanium also make excellent hedges against inflation, which is cooling but remains elevated.

The global titanium alloy market was valued at $4.5 billion in 2019 and is projected to reach about $5.9 billion by 2027, according to research firm DataIntelo.

Demand is especially robust for titanium dioxide, which is a fine, white powder that confers a bright, white pigment. The substance is found in a host of everyday consumer items. The following chart from Grand View Research breaks down titanium dioxide’s segments and growth projections:

With a market cap of $5 billion, ATI operates in three segments: High Performance Metals, Flat-Rolled Products and Engineered Products.

The High Performance Metals segment provides various alloys, including those based on titanium, nickel, cobalt, and zirconium, primarily in the form of ingots, bars, rods, wires, seamless tubes, precision castings, and machined parts.

The Flat-Rolled Products segment provides most of the same alloys, in the form of plates, sheets, engineered strips, and precision rolled strip products.

The Engineered Products segment offers tungsten in the form of powders, carbide materials and carbide cutting tools.

Founded in 1960 in the erstwhile steel capital of Pittsburgh, the company’s customers include major manufacturers that are poised to get back on their feet, as the global economy recovers from its COVID-era lows.

Metal of the Gods…

Named after the Titans of Greek mythology, titanium boasts the highest strength-to-weight ratio of any metal. In its unalloyed form, it’s as strong as some steels but almost 50% lighter.

The resurgent aerospace sector is especially hungry for titanium. To be sure, carbon fiber composites are in great demand for aircraft construction and represent a promising investment theme, but today’s advanced flying machines also require titanium…lots of it.

In the U.S., the aerospace industry accounts for more than 70% of titanium demand, while industrial applications predominate in other countries, such as China.

Boeing (NYSE: BA), the world’s leading aircraft maker, requires huge amounts of titanium for its commercial and military airplanes, especially its Dreamliner 787, the world’s most advanced long-haul commercial jet liner. The Chicago-based giant is a major and steady ATI customer.

Aerospace/defense accounts for about a third of the company’s sales, the largest component. Sales to oil and gas production, chemical processing, electrical utilities, construction and mining, automotive and transportation, electronics and communications, food equipment and appliances, and health care divvy up the rest.

Leveraging energy’s rebound…

Oil and gas engineering applications also are a major growth opportunity for ATI, as the booming energy sector increasingly relies on the company’s super-strong products.

The metal maker’s long-standing relationships with “super oils” such as Chevron (NYSE: CVX), as well as with smaller field services companies, will drive growth as crude oil prices rise.

Titanium alloy materials are crucial for the construction of oil pipelines and well tubing, which are the key elements of offshore platform equipment and subsea wellheads.

Titanium materials for energy applications are not only tough but also corrosion resistant and able to withstand virtually any natural environment, with no service life restrictions. This makes them ideal for the frequently harsh operating conditions of the energy patch.

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ATI is beefing up its presence in emerging markets, especially in Asia where demand for titanium appears insatiable.

A joint venture based in China between ATI and state-owned Baosteel produces wafer-thin stainless steel that’s sold to mainland China, Taiwan, Hong Kong, and other countries in Asia, for uses in such industries as automotive manufacturing.

Massive infrastructure projects in the U.S. and China also are fueling the need for ATI’s products, after the construction slump of 2020.

The analyst consensus calls for Allegheny to rack up year-over-year earnings growth of 20% in the current quarter, 11.10% in the current year, and 23.50% next year. Over the next five years on an annualized basis, ATI is projected to generate earnings growth of a whopping 160.50%. And yet, the stock’s 12-month forward price-to-earnings ratio is only 16.84.

ATI’s share price currently hovers above its 5-, 20- and 50-day exponential moving averages, which is a strongly bullish trend. As a value play on the aforementioned megatrends, this titanium maker is tough to beat.

Which brings me to the unbeatable investment analysis of my colleague Jim Pearce.

As chief investment strategist of Mayhem Trader, Jim Pearce just pinpointed one overlooked precious metal that could offer investors protection and massive profits.

This special commodity recently went up 108% in under 12 weeks, and it has much further to run. Click here for details.

John Persinos is the editorial director of Investing Daily.

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