Was Einhorn Wrong or Early on Martin Marietta Materials?

While a number of hedge funds and other notable investors have large positions in the stock, the top holders in our database of 13F filings weren’t very excited about the company during the third quarter of 2012. Tiger Cub John Griffin’s hedge fund Blue Ridge Capital cut its stake 22% to just under 2 million shares (check out Griffin’s favorite stocks) while Southeastern Asset Management and SPO Advisory held their positions about constant.

Vulcan Materials Company (NYSE:VMC) and Owens Corning (NYSE:OC) are the closest peers for Martin Marietta Materials, Inc., and we can also compare the company to other building materials providers such as Masco Corporation (NYSE:MAS) and Armstrong World Industries, Inc. (NYSE:AWI). Vulcan has been struggling to be profitable at all despite its valuation of $6.7 billion, so investors may be acting even more optimistic about that company. Owens Corning had its revenue and earnings decline at double digit rates last quarter versus a year earlier, though its P/E multiples are at a bit of a discount to Martin Marietta: the forward P/E, for example, is 16. Those consensus earnings are much higher than what the company has done on a trailing basis, so we don’t think that Owens Corning is a good buy either. Masco is in a similar position to these two peers. Armstrong has even higher short interest than Martin Marietta, but its multiples look more modest and so we’d advise against taking a short position.

So far Einhorn has been wrong on Martin Marietta, but even with the stock’s good performance since earlier this year we don’t think that it’s a buy right now. The growth numbers are a plus, but judging by the P/E multiples the market seems to have priced in an even higher growth rate over the next few years.