CRH PLC (ADR) (CRH), Martin Marietta Materials, Inc. (MLM), Cemex SAB de CV (ADR) (CX): Three Pigs Hiding From the Wolf, Recession and Construction

The Mexican market will only keep you afloat

After two years of revenue loss and four of stagnated sales, several hedge funds have taken interest in Cemex SAB de CV (ADR) (NYSE:CX). Stock was recently bought by some of the following funds: Soros Fund Management, Viking Global Investors, and Franklin Income Fund. So, what makes the Mexican based ready mix-concrete firm attractive to investors?

In the short run, Cemex SAB de CV (ADR) (NYSE:CX) will have to improve revenues and sales in the back of a recovering world economy. For the long haul, special attention will be placed in the U.S. market and recovery of the housing market. And, recovery of the Mexican market, where EBITDA reaches 35% and the firm seems to have taken refuge. However, pre-crisis performance levels remain a long stretch away.

Financially, Cemex SAB de CV (ADR) (NYSE:CX) has not weathered economic headwinds as well as the competition. Revenue and net income have been on the downtrend the last 5 years, while debt has risen steadily and cash flow has suffered greatly. And, although operating margin has recovered some ground, it is half that of 2008. In all, the company is not in a good financial shape.

Currently trading at a 34% discount to industry consensus, suspended dividend payments, and a price close to its 52-week high, the stock is not tempting. Hedge funds see a potential winner in the long term, and are making a high-risk investment. However, it is recommended to hold until the recent price hike deteriorates or risks associated ease.

Closing

All three companies are known worldwide, but prospects are different. Concentration, or dependence on one market has had singular results for each competitor. Cemex SAB de CV (ADR) (NYSE:CX) retreated to the Mexican market, hoping to retain a high EBITDA, and Martin Marietta Materials, Inc. (NYSE:MLM) faces lagging difficulties in Europe. Meanwhile, CRH has continued to expand. So, while a drop in cash volumes for Cemex and Martin represent a full loss, Martin has acquired new capital.

Vanina Egea has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

The article Three Pigs Hiding From the Wolf: Recession and Construction originally appeared on Fool.com.

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