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 Summit Materials, Inc. (NYSE:SUM) 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 construction worker in a hardhat, standing proud and wearing a protective mask.
Summit Materials, Inc. (NYSE:SUM)
Number of Hedge Fund Holders: 24
Summit Materials, Inc. (NYSE:SUM) is a vertically integrated aggregates-based business. The company supplies cement, aggregates, ready-mix concrete, and asphalt paving mix in the United States and western Canada.
The firm serves well-diversified customers in advantaged markets with a materials-led portfolio. With aggregates being an essential input for heavyside construction and cement being the most widely used building material globally, the firm benefits from industry characteristics including limited substitutes, barriers to entry, and favorable supplier conditions. Summit also occupies a market leadership position by being one of the largest US cement producers and biggest US aggregates producers.
Despite disruptions related to weather, Summit Materials, Inc. (NYSE:SUM) delivered a strong fiscal second quarter. Net revenue increased 58.1% year-over-year to $1,075.5 million. Results by lines of business were robust. Aggregates net revenue rose 2.5%, cement segment net revenues rose 200.3%, and products net revenues rose 60%, year-over-year. The resilient performance was facilitated by cost-saving initiatives, all lines of business experiencing organic pricing growth, and a durable portfolio.
With attractive industry dynamics for materials lines of business, an industry-dominant position, and a growth-oriented portfolio, Summit Materials, Inc. (NYSE:SUM) is a promising cement and construction materials stock.
Overall, SUM ranks 6th on our list of Best Cement and Construction Materials Stocks to Buy Now. While we acknowledge the potential of SUM 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 SUM 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.
