Nothing in this present market environment is a sure bet. But if you had to pick a sector that could sustain its positive momentum, you may want to consider concrete stocks. Favorable sentiment combined with potential political catalysts may result in a massive buildout.
First, the most conspicuous catalyst for concrete stocks is surging home prices across the nation. Due in large part to an inventory shortage problem that was in place well before the novel coronavirus upturned everything, the lack of housing steadily panicked buyers. Once we became acclimated (more or less) to the pandemic, buying activity swelled remarkably.
Over the foreseeable future, it seems that housing prices will continue to rise. I’ve read countless stories of homes in or near major metropolitan areas finding themselves in a bidding frenzy. Further, with the introduction of corporations buying homes for rental income purposes, this dynamic robs regular folks of attaining real estate ownership. It’s awfully cynical, but it’s possible that concrete stocks can benefit.
Second, the sector enjoys a tailwind from political forces. Under President Joe Biden’s $2 trillion jobs and infrastructure plan, billions are earmarked for affordable and sustainable housing, as well as highways, bridges and roads. There’s also a proposed $95 billion in combination for transportation inequities and infrastructure resilience. Naturally, this could bolster the gains already made by concrete stocks.
Finally, while community-level and political resistance have kept housing artificially low in several metropolitan areas, the pandemic along with a new administration may break down these artificial barriers. Combined with recovery in the global economy, we could see a renaissance in concrete stocks.
Before you get too comfortable with concrete stocks, however, please be aware that nothing is for certain. A lumber shortage has also contributed to record home price rises while imposing critical delays on construction projects. While the narrative is arguably more positive than negative for the concrete market, please note that volatility is not out of the question.
- Vulcan Materials Company (NYSE:VMC)
- Martin Marietta (NYSE:MLM)
- Eagle Materials (NYSE:EXP)
- US Concrete (NASDAQ:USCR)
- CRH (NYSE:CRH)
- Loma Negra Compania (NYSE:LOMA)
- HeidelbergCement (OTCMKTS:HDELY)
Concrete Stocks: Vulcan Materials Company (VMC)
As the nation’s leading producer of construction aggregate and a major provider of asphalt and ready-mix concrete, Vulcan Materials Company consistently tops several discussions of concrete stocks to buy. Obviously, this list won’t be an exception. During this time of uncertainty, you want to go with proven names in your portfolio. With a market capitalization of $23 billion, I’d say VMC stock qualifies.
What’s particularly interesting about Vulcan in the present context, though, is its coverage map. Basically, the company dominates the Sun Belt region of the U.S., which is an ideal market. While millennials are moving out of excessively expensive metropolitan areas in California, they’re not moving to Alaska. Instead, they’re relocating to cities in Arizona and Texas where they can still enjoy the warm weather and rattlesnakes.
Further, investors are noticing. On a year-to-date basis, VMC stock is up over 18%. Over the trailing year, shares are approaching 63% up, demonstrating its incredible recovery from the March doldrums of last year.
Martin Marietta (MLM)
Another example of commonly cited concrete stocks to buy is Martin Marietta, which sports a market cap of $21.8 billion. According to its corporate profile, Martin Marietta is a leading supplier of aggregates and heavy building materials, with operations across 26 states, Canada, the Bahamas and the Caribbean Islands.
Interestingly, one of the company’s specialties is supplying materials for roads, sidewalks and other foundational structures. If I’m reading the political tea leaves correctly, this will put MLM stock in prime position to benefit from President Biden’s infrastructure plan. Under the proposal, $115 billion is earmarked for highways, bridges and roads.
What’s more, I do like Martin Marietta’s geographic footprint. It has massive exposure to the Texas market and a strong presence in Colorado. Both states are very popular with millennials looking for more reasonable costs of living.
Plus, don’t overlook Canada. According to CTV News, Canadian home sales and prices surged to a new record in March.
Eagle Materials (EXP)
A bit on the smaller side compared to the above two concrete stocks, Eagle Materials has a market cap of just under $6 billion. From its website, Eagle Materials is a leading manufacturer of basic construction materials, with an emphasis in residential, commercial, industrial, infrastructure and energy applications.
Should the housing boom continue, EXP stock could reap substantial rewards by riding the unprecedented wave. Of course, there are two arguments here, and if I’m being perfectly honest, I’m not sure if this surge in prices is sustainable. After all, people were complaining about affordable housing before the pandemic. While worker bees saved money from their commute, did they save that much money to plunk down for a home?
The counterargument is that big corporations represent the driving force in home sales now. And if they’re willing to pay beyond top dollar, why would the builders reject this premium payout? Again, I’m concerned about this dynamic, but for the time being EXP stock could be a huge beneficiary.
US Concrete (USCR)
One of the most popular concrete stocks among retail investors, US Concrete has made good on its reputation. On a year-to-date basis, USCR stock is up more than 55%, a stunning result for what is usually a boring sector. And that’s not the most impressive statistic. Over the trailing year, shares have soared 291%. It’s safe to say that USCR was well above its price point just before the coronavirus hit us.
As with virtually all other concrete stocks, US Concrete is enjoying a bullish wave thanks to the infrastructural ambitiousness of the Biden administration. True, the Democrats should expect resistance from the Republicans. However, the need to do something about infrastructure may swing the needle favorably for USCR stock.
Also, it’s worth pointing out that there’s greater emphasis on responsible buildouts. Here, US Concrete has an advantage, given that it has met rising demand for low carbon concrete. Interesting fact: Concrete accounts for about 8% of carbon dioxide emitted into the atmosphere, which dwarfs the aviation industry’s contribution of 2.5%.
Headquartered in Dublin, Ireland, CRH proves that Ireland is much more than shamrocks and bizarrely spelled names perfect for butchering — I’m looking at you, Dennis Quaid. One of the biggest international concrete stocks, CRH employs over 77,000 people at 3,110 locations worldwide. Its global operations span 30 countries, and it’s the largest building-materials business in Europe. Currently, CRH has a market cap of $37.8 billion.
Although most of the attention regarding concrete stocks fundamentally points toward the Biden administration’s plan to “build back better,” the sentiment itself is not an exclusively American phenomenon. For instance, electric vehicles (EVs) are all the rage in Europe. But the latest data shows that the region lacks the infrastructure to accommodate rising demand. That’s something that CRH stock could potentially benefit from.
As well, CRH is a slow mover. On a YTD basis, shares are up 12.5%, which is a stark contrast to fast-rising USCR. However, this could be a benefit for those seeking an under-the-radar blue-chip play.
Loma Negra Compania (LOMA)
For those that prefer speculation in their concrete stocks, Loma Negra Compania, which is based in Argentina, may be just the right ticket. As the South American country’s leading manufacturer of cement, concrete and lime, Loma Negra offers vital exposure to a key growth market.
One of the critical components of the broader Latin American economy is their demographic distribution. Typically, countries in this region lean heavily young, and Argentina is no exception. Most of its population is in prime working age, and that will carry over into future generations. Cynically, the elderly population is limited in size, which bodes well longer term for LOMA stock.
That said, shares are risky because the region isn’t particularly well-known for geopolitical and economic stability. Hence, LOMA stock is priced in subterranean territory relative to western concrete stocks, with a price of just under $6 as of the time of publication. Furthermore, LOMA has yet to reach its beginning of January 2020 price, which raises serious concerns.
Nevertheless, if you’re looking for a high-risk, high-reward name in an otherwise boring sector, LOMA is it.
As you might surmise from its corporate name, HeidelbergCement is a German multinational building-materials company headquartered in Heidelberg, Germany. Though it may not be a household name, you shouldn’t let the fact that HDELY stock is traded on the over-the-counter exchange fool you. With a market cap of 15.7 billion EUR (or around $18.8 billion using current exchange rates), HeidelbergCement is one of the biggest firms among concrete stocks.
As I mentioned with CRH, the buildout trend isn’t an exclusively American proposition. With innovative industries such as EVs, along with rising immigration in Europe, there will be plenty of commercial and residential projects to keep HeidelbergCement busy. As well, the company is itself an innovator, building the first industrial-scale carbon capture and storage project at a cement production facility in Brevik, Norway.
Increasingly, construction projects aren’t just about building capacity but also environmental responsibility. HeidelbergCement’s leadership in this area should serve it well as it competes for contracts in a marketplace that is recognizing the economic viability of going green.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.
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