2 ASX 'not mining' shares I think are overdue for a big rally

The cyclical nature of resources stocks is not everyone's cup of tea. But here's a pair of investments that could be a decent alternative.

| More on:
Two people smiling at each other while running.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Mining is a notoriously cyclical industry, with the valuations of ASX miners closely linked to wildly fluctuating global commodity prices.

However, there is a way to get exposure to the industry with a smoother ride.

The ASX is fortunate enough to have a few mining services providers listed. These businesses provide outsourced labour for clients in the resources industry.

While these stocks obviously have their fortunes linked to the mining industry, their contracts shift from one commodity to another depending on where the demand moves.

There are two mining services providers that I currently think are worthy of adding to the portfolio. 

One is a growth stock, while the other is a dividend producer:

More earnings growth coming

Mader Group Ltd (ASX: MAD) shares have already rocketed 82% so far this year.

But with it cooling off more than 14% since mid-September, I think it has the legs to fly higher over the coming years.

The global economy is at a low part of the cycle, with steep interest rate rises taking a toll on demand in western countries. Over in China, rates are low but only because it is trying to stimulate a moribund economy.

The idea is that, in one or two years' time, the economy can only be better from here.

And when the economy improves, demand for goods pick up, and mineral prices rise.

The team at QVG liked what it saw from Mader Group back in reporting season.

"Mader delivered 48% earnings growth and backed it up by guiding to another 30% growth next financial year," read its memo to clients.

"Guidance given so early in the financial year needs to be conservative and suggests they continue [to] win work in their key markets."

According to CMC Markets, four of the five analysts currently covering the $1.3 billion business reckon its shares are a buy.

The mining services stock handing out 6.5% yield

Over in dividend land, NRW Holdings Limited (ASX: NWH) seems a tempting buy at the moment.

The share price is down 9% since the start of the year, presenting an attractive entry point.

NRW Holdings pays out a fully franked dividend yield of 6.5%, which is not bad at all.

While the share price is down in recent times, over the longer run it has delivered. For example, since 2 July 2021, NWH has rocketed 71.6%.

If you had bought NRW shares back then, you'd be raking in a sensational dividend yield of 12.5% now.

So, for the long-term investor, it could be prudent to get in on this action while the stock is down.

I'm not the only one thinking along these lines. Eight out of nine analysts surveyed on CMC Markets currently rate NWR shares as a buy.

Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Mader Group. The Motley Fool Australia has positions in and has recommended Mader Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Resources Shares

Man with rocket wings which have flames coming out of them.
Share Gainers

This ASX All Ords stock just surged 88% in less than 3 days! Any guesses?

The ASX All Ords stock is drawing intense buying interest from investors this week.

Read more »

Scared looking people on a rollercoaster ride representing the volatile Mineral Resources share price in 2022
Resources Shares

How is the Fortescue share price down 3% today?

Shareholders should be cheering today's Fortescue losses.

Read more »

2 people at mining site, bhp share price, mining shares
Resources Shares

Why is the BHP share price trailing the ASX 200 on Tuesday?

BHP shares are underperforming the ASX 200 today.

Read more »

Image of young successful engineer, with blueprints, notepad and digital tablet, observing the project implementation on construction site and in mine.
Resources Shares

These ASX 200 mining stocks can deliver 20%+ returns

Analysts are tipping big returns from these miners.

Read more »

Miner looking at a tablet.
Mergers & Acquisitions

Alumina shares leap 8% on Alcoa takeover bid

ASX 200 investors are sending the Alumina share price soaring following confirmation of Alcoa’s takeover intentions.

Read more »

two men in hard hats and high visibility jackets look together at a laptop screen that one of the men in holding at a mine site.
Resources Shares

Here's the BHP dividend forecast through to 2026

This miner is committed to paying appealing dividends.

Read more »

View from below of a man with a shovel standing by a hole he has dug in the garden, with blue sky in the background.
Resources Shares

Here's why I'm steering clear of Core Lithium shares

Lithium has bottomed out over the past year, but here's why this is NOT the bargain stock to buy.

Read more »

Two miners examine things they have taken out the ground.
Resources Shares

Better buy: Fortescue or BHP shares?

Let’s dig into the potential of these two mining heavyweights.

Read more »