In this article we will take a look at the 10 construction stocks under $10. You can skip our detailed analysis of the construction industry’s outlook for 2021 and some of the major growth catalysts for construction companies and go directly to the 5 Construction Stocks Under $10.
The global construction industry is growing at a positive rate and is expected to reach an estimated value of $10.5 trillion by 2023. The forecasted growth rate for the market is approximately 4.2% from 2018 to 2023 according to Research and Markets. The factors that are driving this growth include population increases in developing countries, necessary upgradation of infrastructure in developed economies, the growing trend towards increased residential development, and investment in renewable energy and telecommunication sectors. President Biden’s ambitious infrastructure plan is also set to boost some notable construction stocks in 2021 and beyond.
Overall, the future outlook of the global construction industry is positive in the long term as postulated by a Deloitte report.
Growth in the Construction Industry
Construction is a major contributor to the biggest economies of the world such as the US, China, Japan, and India etc. The construction industry in the US has more than 680,000 employers with over 7 million employees and creates about $1.3 trillion worth of structures every year according to the Associated General Contractors of America (AGC). In the first quarter of 2020, the construction industry added over $900 billion to the US economy and employed 7.64 million people. However, like many other industries, the construction market also took a huge hit due to the COVID-19 pandemic that has engulfed the world. The pandemic led to a historic collapse in construction activity creating a loss of approximately $60.9 billion in GDP in the United States. Economic shutdowns and supply chain disruptions jeopardized operations and construction schedules. Moreover, contractors were also hit as the sub-contractors were not able to report to the jobs. But as nation-wide vaccination programs are being conducted, and the government is offering protection against forbearance and foreclosure on mortgage payments, the construction industry is getting back on track with several new projects starting in the country. GlobalData estimates that after the disruption caused by COVID-19, the construction industry is set to grow by 5.2% in 2021 and output during the year will increase by 2.5% over the preceding year. This is why many construction stocks under $10 could be worth much more by the next few years and are a great opportunity for investment today.
Even though our focus in this article would be construction stocks under $10, some notable construction stocks that are currently getting the attention of the Wall Street worth a mention. Construction giant Caterpillar (NYSE:CAT) crushed analysts’ forecasts for the first quarter of 2021, indicating a strong recovery after COVID-19 losses. Caterpillar (NYSE:CAT)’s net income in the period came in at $1.53 billion, up from $1.09 billion past year. Revenue in the period jumped 12% to reach $11.9 million.
Caterpillar (CAT)’s construction revenue in the period rose 27% year over year to $5.46 billion.
America’s leading homebuilder Lennar Corporation (NYSE: LEN) is also seeing signs of recovery. In March, Lennar Corporation (NYSE: LEN) upped its guidance for FY2021 gross margin and average home sale price The company expects its gross margin in 2021 to increase to 25%, compared to the previous guidance of $20.6%.
Lennar Corporation (NYSE: LEN)’s deliveries in the year are expected to total between 62,000 and 64,000.
Another construction stock being watched by the Street is D. R. Horton (NYSE:DHI). The company recently posted better-than-expected fiscal second quarter results. D. R. Horton (NYSE:DHI)’s home closes increased by 36% to 19,701 in the period. Net sales orders increased 35% to 27,059, crushing the estimates of 24,078 For full-year 2021, D. R. Horton (NYSE:DHI) expects consolidated revenue of $26.8 billion to $27.5 billion, above the consensus of $25.92 billion.
Other than the rise in homebuilding activity and government-backed infrastructure projects, some interesting projects that are underway include the Cybertruck plant that is being opened by Tesla, Inc. (NASDAQ: TSLA). The company plans on bringing the electric pickup truck to production in late 2021 and it has over 650,000 reservations for the electric vehicle, according to the latest tally. For the plant, Tesla, Inc. (NASDAQ: TSLA) recently bought 381 acres of land in Austin, Texas. Construction activities of this $1.1 billion manufacturing project will offer much-needed assistance for the growth of the industrial buildings sector. Moreover, Steel Dynamics, Inc. (NASDAQ: STLD) that is going to be the steel supplier for Tesla’s project is also building a new plant worth $1.7 billion in Sinton, Texas. Additionally, Ferrero North America has also announced its plan of constructing a new chocolate manufacturing unit in Illinois. Set to the first production plant for the company in North America, the manufacturing unit will involve a total investment of $75 million. The Children’s Hospital of Philadelphia is also planning to spend $3.4 billion on construction of 22-story inpatient tower adding 300 beds and around 200 rooms. According to a Deloitte report, the US federal government has agreed to spend $2 trillion over the next 10 years to upgrade infrastructure throughout the country which is a huge opportunity for the construction industry. With construction activities set to commence by spring 2021, it will also boost the recovery of the construction sector in the country. These activities will not only buoy the big companies but will also help construction stocks under $10.
Trends in the Construction Industry
Technology is having an unprecedented impact on the engineering and construction industry. Many construction companies are using robots like autonomous rovers that can increase the efficiency and quality of site inspections to mechanical arms that can quickly perform highly repetitive tasks such as layering bricks. Drones are also set to become increasingly common in construction projects. From performing inspections that would be dangerous for workers to surveying vast areas of land in just a few minutes, the continued rise of drones could considerably improve safety and productivity in construction. There is also an emerging trend of green building construction in the residential sector due to the rising number of building regulations and policies mandating energy-efficient structures. This has created a market for environment-friendly and energy conserving materials used in residential construction. Companies like CEMEX, S.A.B. de C.V. (NYSE: CX) are launching net-zero carbon concrete which will help reduce the carbon emissions in building construction. Furthermore, some of the largest tech companies like Microsoft Corporation (NASDAQ: MSFT) and International Business Machines Corporation (NYSE: IBM) are investing in megaprojects to build smart cities. These projects will increase opportunities for construction investors. Investment in intelligent infrastructure development topped $120 million in 2020 and is expected to rise in the coming years, according to SmartCitiesDive.
There is no doubt that the construction industry is on track to grow and companies like Caterpillar (CAT), D. R. Horton (DHI) Steel Dynamics, Inc. (NASDAQ: STLD), Lennar Corporation (LEN), Orion Group Holdings, Inc. (NYSE: ORN), View, Inc. (NASDAQ: VIEW), and Hill International, Inc. (NYSE: HIL) are set to take advantage of the emerging technologies and boost productivity. But in this article, instead of expensive construction plays our focus will be on 10 construction stocks under $10.
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Here is a list of 10 construction stocks under $10 that have huge potential to grow in the construction industry.
Best Construction Stocks Under $10
10. Perma-Pipe International Holdings, Inc. (NASDAQ: PPIH)
Market Cap: $53.072 million
Number of Hedge Fund Holders: 2
Perma-Pipe International Holdings, Inc. (NASDAQ: PPIH) is headquartered in Illinois and was founded in 1909. The company together with its subsidiaries, designs, engineers, manufactures, and sells specialty piping and leak detection systems for the construction industry. It has operations in the United States, Canada, the Middle East, Europe, and India. Perma-Pipe International Holdings, Inc. (NASDAQ: PPIH) has signed a contract with Nesma & Partners Contracting worth $5.7 million to develop a district cooling network for the King Abdul Aziz Road in Saudi Arabia. It has also been awarded a contract of $6.7 million in India for the Mangla crude oil pipeline. The company reported a total revenue of $127 million in fiscal year 2020 and is a great choice for investors looking for construction stocks under $10.
PPIH ranks 10th in our list of 10 construction stocks under $10.
At the end of the fourth quarter of 2020, 2 hedge funds in the database of Insider Monkey held stakes worth $3.2 million in the firm, the same as in the previous quarter worth $3.3 million.
9. Hill International, Inc. (NYSE: HIL)
Market Cap: $155.722 million
Number of Hedge Fund Holders: 9
Hill International, Inc. (NYSE: HIL) was founded in 1976 and is headquartered in Philadelphia. It is a project and construction management company that also provides consulting services for the buildings, industrial, transportation, environmental, and energy industries. It primarily serves the United States federal, state, and local governments, other national governments, and the private sector customers. The company has operations in the United States, Europe, Latin America, the Middle East, Africa, and the Asia Pacific. Hill International, Inc. (NYSE: HIL) has announced that it was awarded a contract to manage the construction for the second phase of the Assoufid development in Marrakech, Morocco. It also signed a contract with LAMDA Development to provide consulting services for the Infrastructure and Landscape Program of the Hellinikon Project which is Europe’s largest waterfront urban regeneration program. Hill International, Inc. (NYSE: HIL) was awarded over $190 million in global infrastructure awards making it a top pick in the list of the best construction stocks under $10. Although the fee revenue for the company declined to $72.7 million in the fourth quarter of 2020 from $76.8 million in 2019, the unrestricted cash position of the firm more than doubled. According to Hill’s latest earnings report, the company was also able to grow their adjusted EBITDA for 2020 by 12.4% year-on-year.
At the end of the fourth quarter of 2020, 9 hedge funds in the database of Insider Monkey held stakes worth $31.5 million in the firm, slightly down from 10 in the preceding quarter worth $21.4 million.
Greystone Capital Management, in its Q1 2021 investor letter, mentioned SharpSpring, Inc. (NASDAQ: SHSP) and Hill International, Inc. (NYSE: HIL). Here is what Greystone Capital Management has to say about SharpSpring, Inc. and Hill International, Inc. in its letter:
“I made the decision to trim and/or exit client positions in Sharpspring Technologies and further reduce certain client positions in Hill International (HIL) following a 100%+ return in our Sharpspring position and further price increases in shares of Hill International. The decision was made in order to funnel some capital into current and new positions that based on my estimates have higher upside and better risk/reward profiles. For our continued ownership in HIL, I’m expecting a very positive 2021 where we may see the business return to top line growth and increased free cash flow generation as we continue to move past the effects of COVID-19. As for Sharpspring, I remain a fan of the business and believe upside still exists as the company continues to tackle their marketing software niche and focus on driving new customer growth. For Sharpspring, recent capital raises, additions to the Board and increased revenue growth during 2020 all point to positive operational signs. However, it is not as clear to me at these price levels whether we will be able to meet our 15-25% per year return criteria moving forward. I will continue to follow the business and look forward to any opportunities to purchase shares at lower prices.”
8. Orion Group Holdings, Inc. (NYSE: ORN)
Market Cap: $166.569 million
Number of Hedge Fund Holders: 13
Orion Group Holdings, Inc. (NYSE: ORN) is a specialty construction company operating in the industrial, building, and infrastructure sectors in the US, Alaska, Canada and the Caribbean Basin. The company provides various marine construction services, including construction, restoration, dredging, maintenance, and repair of marine transportation facilities and pipelines, bridges and causeways, and marine environmental structures. The company recently announced new contract awards worth approximately $27 million. The work on all these projects will commence in the second quarter of 2021 and is estimated to be completed before the year ends. According to the latest earnings report of Orion Group Holdings, Inc. (NYSE: ORN) the net income for the fourth quarter of 2020 was $3.7 million with $0.12 diluted earnings per share compared to net income of $0.2 million with $0.01 diluted earnings per share in the same quarter of 2019. The company has shown strong growth in profitability and cash flow for 2020 and their adjusted EBITDA increased by more than 35% over 2019 showing an improvement in the adjusted EBITDA margin by 210 basis points. According to Orion’s CEO Mark Stauffer, this improvement was driven by production efficiency gains. This strong performance makes it a great pick for investors who are looking for the best construction stocks under $10.
In the fourth quarter of 2020, ORN shares were owned by 13 hedge funds worth a total value of $13.5 million up from 10 hedge funds in the third quarter of the same year, according to Insider Monkey’s database.
7. DIRTT Environmental Solutions Ltd. (NASDAQ: DRTT)
Market Cap: $290.033 million
Number of Hedge Fund Holders: 5
DIRTT Environmental Solutions Ltd. (NASDAQ: DRTT) is a Calgary-based company that was incorporated in 2003. It designs, manufactures, and installs prefabricated interior solutions which are primarily used in commercial spaces across several businesses and industries in the United States. DIRTT Environmental Solutions Ltd. (NASDAQ: DRTT) is of great interest in the construction industry due to its ICE software which provides integration and management for construction projects. It is used throughout the process from designing and manufacturing to installation. It offers interior construction solutions through a network of independent distribution partners and serves the healthcare, education, hospitality, medical, and commercial industries.
With a market cap of $290.033 million it is no surprise that the company is in the top 10 construction stocks under $10 list. DIRTT Environmental Solutions Ltd. (NASDAQ: DRTT) recently announced the release date of its largest version of the ICE 21 software which will allow expanded functionality for its users. As stated in the company’s annual report, revenues for the year 2020 were $171.5 million, a decline of $76.2 million or 31% from $247.7 million for the year 2019. Moreover, the gross profit for 2020 was $53.3 million.
Unlike Caterpillar (NYSE:CAT), Lennar Corporation (NYSE: LEN) and D. R. Horton (NYSE:DHI), DRTT is a cheap construction stock to ride the upcoming infrastructure boom in the US.
6. Cementos Pacasmayo S.A.A. (NYSE: CPAC)
Market Cap: $667.992 million
Number of Hedge Fund Holders: N/A
Cementos Pacasmayo S.A.A. (NYSE: CPAC) is a cement company, produces, distributes, and sells cement and cement-related materials in Peru. The company operates in three segments: Cement, Concrete and Precast; Quicklime; and Sales of Construction Supplies. It produces cement for various uses, such as residential and commercial construction, and civil engineering. It also distributes other construction materials manufactured by third parties, such as steel rebars, cables, and pipes. As of March 31, 2021, the company operates a network of 269 independent retailers and 405 hardware stores. The company’s sales volume of cement, concrete and precast increased by an outstanding 37.2% in 2020. The total revenue in 2020 was $338 million which was a 27.1% year-on-year increase.
On November 16, 2020, Cementos Pacasmayo S.A.A. (NYSE: CPAC) approved a cash dividend of $0.23 per common and investment share. The strong financial performance of the company makes it a good pick for the 10 construction stocks under $10 list.
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Disclosure: None. 10 Construction Stocks Under $10 is originally published on Insider Monkey.