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 Commercial Metals Company (NYSE:CMC) 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).
A close-up of a worker welding a steel product, showing the precision and craftsmanship.
Commercial Metals Company (NYSE:CMC)
Number of Hedge Fund Holders: 24
Commercial Metals Company (NYSE:CMC) is an innovative solutions provider that provides products and technologies to cater to the critical reinforcement needs of the global construction sector. The firm was the first steel manufacturer to introduce vertical integration in the United States. CMC combined the recycling and processing of scrap metals with the blending of processed scrap into new steel and the fabrication of finished steel products which transformed the steel industry.
CMC is an innovative leader in the industry by opening the first continuous process micro mill and being the first in the US to introduce spooled rebar. The firm is a key supplier to construction projects across two continents by being among the largest manufacturers of steel reinforcing bars in North America and Central Europe. CMC is also a leader in the steel long products market as it produces merchant bar, steel fence post, and wire rod.
The firm closed the fiscal third quarter with core EBITDA margin, core EBITDA, net earnings, and cash flows at levels above long-term averages. The aforementioned metrics also improved as a result of the strong operational performance across CMC’s footprint and a healthy beginning to the 2024 construction season.
CMC is preparing itself to benefit from the favorable long-term structural trends in construction activity by several projects. The firm is ramping up its state-of-the-art Arizona 2 plant, the first micro mill across the globe capable of producing both rebar and merchant bar quality (MBQ) product. CMC is also completing foundations at the site of its fourth micro mill in West Virginia.
CMC has leading positions in core products and geographies and a vertical structure that optimizes returns through the value chain. In conclusion, Commercial Metals Company (NYSE:CMC) is set to deliver industry-leading returns and is stronger than ever to capitalize on the strength in infrastructure, non-residential construction, and OEM.
Overall, CMC ranks 7th on our list of Best Cement and Construction Materials Stocks to Buy Now. While we acknowledge the potential of CMC 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 CMC 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.