Vulcan (VMC): Mason Hawkins Is Getting Out Of This Materials Company

Hawkins was not only an investor in Vulcan and Cemex during 3Q, but his firm also had a 6.2 million share position in Martin Marietta, making up Southeastern’s 18th largest 13F holding. Martin Marietta is expected to see sales weakness as well, down 13% in 2012, but unlike Vulcan’s expected sales decline in 2013, Martin expects growth of 10%. Martin also appears to provide investors a bit more downside protection when it comes to economic uncertainty, compared to Vulcan. Martin pays a 1.75% dividend yield, where Vulcan’s is virtually nonexistent, and Martin is a bit cheaper at 1.7x sales, compared to Vulcan’s 2.3x. Hawkins has good company in Martin Marietta as billionaire Ken Griffin – founder of Citadel Investment Group  – upped his stake over 50% during the third quarter (see Ken Griffin’s newest picks).

Eagle Materials, Inc. (NYSE:EXP) trades at a high P/E of 50x, but this is relatively in line with Martin (50x) and Vulcan (70x). Digging deeper, Eagle’s 20x forward P/E appears to make its valuation much more attractive. Despite being up over 100% year to date, this cement company appears to be a much better buy than Cemex. Eagle also pays a small but steady dividend that yields 0.75%. Billionaire Jim Simons is intrigued by Eagle Materials, and upped his stake 50% during the third quarter (check out Jim Simons’ top picks).

Taking a look at a bonus play, we can see that CRH PLC (NYSE:CRH) is a diversified building materials company with operations in high growth countries such as China and India. At only 17x earnings, CRH is a bit more attractive than the other materials companies listed. This materials company also has the best growth prospects with a five-year expected EPS growth rate of 20%.

We believe that Hawkins and Southeastern are taking the stance that a prolonged slowdown in the materials industry could continue into the immediate future, and that certain companies might be out of line from a valuation standpoint – namely Vulcan and Cemex. Both stocks are up over 50% during the last six months amidst an uncertain recovery, and we believe there might be better investments with exposure to the U.S. construction industry.