In this article, we present the list of the 10 best construction materials stocks to buy right now. Click to skip ahead and see the top 5 construction materials stocks to buy now.
The construction material industry consists of a wide range of companies involved in the mining, quarrying, and processing of raw material used for both heavy and building construction. It is an important sector that contributes greatly to the economic growth of a nation. They represent the building blocks of a community, it is because of the construction industry we have schools, churches, malls, offices, etc. It is these buildings and infrastructure that represent the fundamental foundations of a strong economy. A strong construction sector and robust infrastructure can help bring in foreign investment, it can help boost tourism, and create millions of jobs.
Even during these trying times brought about by the impact of Covid the construction industry remains committed to continuing to fill the demand and strive to keep the economy afloat.
So why invest in Construction material stocks? Construction is a $1.3 trillion industry in the United States. Worldwide, the construction materials market is expected to reach over 1 trillion U.S. dollars in 2020. In Asia, China is the most notable country with its increase in urbanization behind the government’s projects of infrastructure and housing investments.
The Federal Reserve reduced the short-term interest rates to near zero and is expected to keep interest rates at the zero lower bound for a prolonged period of time. One intended consequence of Fed’s low-interest policy is historically low mortgage rates. The 30-year mortgage rates have been hovering below the 3% level in the second of 2020 and reaching a new low almost every other week. This has been not only boosting the refinancing activity but also increasing the demand for housing. Existing home sales were up 21% in September 2020 (compared to September of 2019). According to NAR, the median existing-home sales price went up nearly 15% in September. We believe this may be the perfect time to get into construction materials stocks.
How strong is the construction industry today? We have been reading stories about how technology upstarts are looking to disrupt the $1.3 trillion U.S. construction market. Well, let’s just say that despite all the efforts to go contactless and digital amidst the pandemic, the construction materials stocks are immune to disruption because there is no technological substitute for construction materials. Retailers, construction management companies, and construction workers (AI powered robots?) may be disrupted in the future but not materials.
In order to identify the best construction materials stocks, we mostly focused on materials companies and excluded construction management companies as well as retailers such as Lowe’s (LOW) and Home Depot (HD). Both of these stocks are among the winners of the coronavirus recession and would have topped our list of the best construction materials stocks. Hedge funds are especially more bullish on LOW than HD at the moment. Our list started with 19 construction materials stocks and we narrowed it down to 10 by using the number of bullish hedge fund positions in each stock.
As a litmus test, we used hedge fund sentiment to gauge the profitability of potential investment ideas and to predict the trajectory of the market.
In research conducted by Insider Monkey, it was shown that a select group of hedge fund holdings has consistently outperformed the S&P 500 ETFs. For instance, our monthly newsletter’s portfolio of stock picks beat the market by more than 66 percentage points since March 2017 (see the details here). Proving that the sentiment of hedge funds is certainly a beneficial measure to which investors should take notice.
Based on our hedge fund sentiment data, we present the 10 best construction materials stocks among the 800+ hedge funds by Insider Monkey:
10. Cemex S.A.B. de C.V. (NYSE:CX)
No. of HFs: 16
Total Value of Hedge Fund Holdings: $283 million
The Mexican multinational construction materials firm, CEMEX S.A.B. de C.V., (NYSE: CX) also known as Cemex, is headquartered in San Pedro, near Monterrey, Mexico. In over 50 countries around the world, it produces and distributes cement, ready-mix concrete, and aggregates.
Cemex’s net sales in the first nine months of 2020 was US$9.43 billion, down by 4% year-on-year from US$9.87bn in 2019.
9. Beacon Roofing Supply, Inc. (NASDAQ:BECN)
No. of HFs: 23
Total Value of Hedge Fund Holdings: $$324 million
Beacon Roofing Supply, Inc. (NASDAQ: BECN) is an American publicly traded company that markets residential and non-residential roofing products as well as related construction products in North America.
The company’s net sales is US$6,943.9 million for the year 2020 and US$7,105.2 million USD for the year 2019.
8. JELD-WEN Holding, Inc. (NYSE:JELD)
No. of HFs: 24
Total Value of HF Holdings: $210 million
JELD-WEN Holding, Inc. (NYSE: JELD) is a holding company, together with its subsidiaries, they designs, manufacture, and distribute interior and exterior doors, as well as wood, vinyl, and aluminum windows.
During the third quarter of 2020, the company had a net revenue of US$1,112.9 million.
7. Forterra, Inc. (NYSE:FRTA)
No. of HFs: 27
Total Value of HF Holdings: $129 million
Forterra, Inc. (NYSE: FRTA) manufactures pipe and precast concrete products, provides portable precast bridges and drainage inlets, wing walls, headwalls, junction boxes, end parts of the pipe, storm and sanitary manholes, and bridges for prestressing.
During the third quarter of 2020, the company has a net sale of US$256.6 million.
6. Emcor Group, Inc. (NYSE:EME)
No. of HFs: 29
Total Value of HF Holdings: $178 million
Emcor Group, Inc. (NYSE: EME) is a Norwalk, Connecticut, USA based company. They provide mechanical and electrical construction, industrial and energy infrastructure, and facilities services to commercial, industrial, utility, and institutional customers.
During the third quart of 2020, the company reported an operating income of US$135.49 million, US$2.2 billion in revenue, and US$270 million cashflow.
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Disclosure: None. 10 best construction materials stocks to buy now is originally published at Insider Monkey.