Knife River (KNF): A Bull Case Theory

We came across a bullish thesis on Knife River on Flyover Stocks’s Substack by Todd Wenning. As of 3rd July, Knife River’s share was trading at $80.60. KNF’s trailing and forward P/E were 25.35 and 19.71 respectively according to Yahoo Finance.

Knife River (KNF), a North Dakota-based construction materials and service business, has been on the radar since its spin-off in 2023 from MDU Resources. The company has dropped 23% since its initial coverage, while the S&P 500 has gained 5.6% and the Materials SPDR is down 2.4%. Knife River is a vertically-integrated aggregates company with over 1 billion tonsons of reserves,  anding as the fourth-largest producer of sand and gravel in the United States, primarily operating in the northern and northwestern U.S. states.

The company recently expanded its aggregates business by acquiring Strata Corporation, a North Dakota-based peer, which helps Knife River consolidate its leadership in the region. The acquisition aligns with Knife River’s values of people, safety, quality, and environment, and features a qualified and high-quality management team. This move suggests that management has a good acquisition and capital allocation skill, which warrants further analysis along with the company’s moats and valuation.

The stock appears to be worth a closer look, given its recent performance and expansion efforts. With a stronger position in the aggregates market and a solid management team, Knife River presents an investment opportunity. Further analysis of management’s skills, moats, and valuation will help determine the stock’s potential. The recent drop in stock price may have created an attractive entry point for investors, making Knife River a company to watch in the construction materials and services sector.

While this is our first coverage on Knife River, we’ve recently examined another bullish thesis in June 2024 for a stock in the same Building Materials industry that sheds light on similar long-term dynamics. In comparing Knife River (KNF) to Martin Marietta Materials (MLM), it’s clear that both companies operate in the building materials sector, but their strategies and focuses diverge. KNF is a vertically integrated aggregates company with a strong presence in the northern and northwestern U.S. states. KNF is focused on consolidating its leadership in the aggregates market through strategic acquisitions, such as its recent purchase of Strata Corporation. Both companies are well-positioned to benefit from increased infrastructure spending and growth in the building materials sector.

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Disclosure: None. This article was originally published at Insider Monkey.