We recently published a list of 11 Best Cement and Construction Materials Stocks to Buy Now. In this article, we are going to take a look at where Boise Cascade Company (NYSE:BCC) stands against other best cement and construction materials stock.
Tailwinds for the Construction Materials Sector
The construction materials sector is expected to benefit from the residential construction activity while a chronic supply of homes penetrates the US. The extent of the shortage is concerning with some estimating it to range between 2 to 8 million housing units. This has sent home prices soaring over the past decade. As the mortgage rates fell in September with the Fed signaling rate cuts, the US home builder sentiment inclined after witnessing four months of continuous declines.
The Federal Reserve’s first 0.5 percentage point rate cut was welcomed by construction executives who regarded it as a move likely to foster real estate investment and construction activity. Analysts see a positive aspect on the supply side of the housing market as they believe that the rate cut will ease out financing conditions for homebuilders and get them building again. Taking into account the news that officials have pointed to another rate cut before the year’s end, the builder sentiment can highly improve which will favor the building materials sector by driving demand for input materials.
Furthermore, the Infrastructure Investment and Jobs Act (IIJA) which was signed into law in November 2021 is still in action. Considering the fact that significant funding to the asphalt and road paving industry comes from the US government, the beneficiaries in this scenario are construction materials companies. Three years into the 5-year $1.2 trillion act, only 40% of funds from the infrastructure law have been allocated to projects. White House data analyzed by CNBC unveiled that the biggest chunk of IIJA money was flowing to road and bridge construction. IIJA will be extending the support for construction projects beyond the initial five-year period since much of the funds will stay available until they’re used up. Therefore, federally funded projects supported by the IIJA are a positive sign for the construction materials businesses.
Our Methodology:
In order to compile a list of the 11 best cement and construction materials stocks to buy now, we first use a stock screener to make an extended list of 20 relevant companies with the highest market caps. Moving on, we shortlisted the top 11 stocks from our list which had the highest number of hedge fund holders. The 11 best cement and construction materials stocks to buy now have been ranked in ascending order of the number of hedge fund holders, as of Q2 2024.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Aerial shot of a building site stocked with lumber and other building materials.
Boise Cascade Company (NYSE:BCC)
Number of Hedge Fund Holders: 22
Boise Cascade Company (NYSE:BCC) is a manufacturer and distributor of building materials. The company operates two divisions, Building Materials Distribution and Wood Products Manufacturing. It came into being by the merger of Cascade Lumber Company of Yakima, WA, and Boise Payette Lumber Company of Boise, ID. Boise Cascade serves diversified customer segments, ranging from independent dealers to large chains and home centers.
Boise Cascade has a leadership position in the building products industry throughout North America by being among the largest producers of engineered wood products and plywood. An industry-leading scale, strong relationships and distribution rights with leading brands, deep customer relationships, and nationwide distribution capacities are some of the competitive advantages setting Boise Cascade apart in the building materials industry. The firm’s complementary divisions have been strategically aligned and have demonstrated market share growth together.
Amidst elevated mortgage rates and economic uncertainties, Boise Cascade Company (NYSE:BCC) demonstrated steady execution in both businesses in Q2. It reported net income of $112.3 million on sales of $1.8 billion. Although the demand environment was challenging and remains uncertain, management is confident to deliver good results through the second half of the year.
The demographics are also turning out to be on the side of Boise Cascade Company (NYSE:BCC). These include a large cohort entering the homebuying age and an undersupply of homes due to decades of underbuilding. Furthermore, locked-in low-rate mortgages and record-high home equity levels are driving strength in repair and remodeling.
Overall, BCC ranks 9th on our list of Best Cement and Construction Materials Stocks to Buy Now. While we acknowledge the potential of BCC as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued AI stock that is more promising than BCC but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.