Render batching and sorting

I'd probably try to find a balance between the two.
In most games you will have a large chunk of geometry that already exists at the beginning of a level (i.e. is created during load time). For that geometry you can probably combine the two: Sort the geometry based on the material it's going to be rendered with, and then place as many "material groups" as you can / want in one buffer. That shouldn't take too long to do and you'll end up with buffers of a sensible size (i.e. few buffer changes) and can still batch all objects using the same material.
For geometry created during gameplay you'd probably only sort by materials, because the above might be too slow to do during run-time.

That makes sense thanks for the reply... I have another question as well... if we have geometries with alpha blending options the scene needs to be rendered from far to near, is that correct? if it is, wouldn't that screw up the sorting?

Normally you render the alpha-blended after everything else, with a different sorting. This might help: Alpha-blending and the z-buffer

Take a look at this: http://realtimecollisiondetection.net/blog/?p=86

The idea is you encode values into a 64-bit integer, and use integer compare to do your sorting.