We recently published a list of 10 Best 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 the other best construction materials stocks.
The New Administration: Implications for the Building Materials and Construction Sector
Donald Trump’s policy agenda including deregulation, tariffs, and tax cuts, has different implications for different investment sectors, according to market experts. As reported by CNBC, the housing and related sectors will be negatively impacted if Trump’s policies of tariffs, tax cuts, and mass deportations drive inflation since the Fed would have to keep the interest rates higher for longer than anticipated which would likely drive mortgage rates up. At the same time, deregulation could be a boosting factor for the industry if it lowers costs for developers and accelerates building timelines. Although Trump plans to open up federal land for building and create tax incentives for homebuyers, there is not much clarity on the front as of now.
It is important to consider that U.S. homebuilder sentiment rose to a seven-month high in November. The National Association of Home Builders/Wells Fargo Housing Market Index rose to 46 in November from 43 in October. Meanwhile, expectations for sales in the next 6 months climbed to the highest since April 2022 after Trump’s win in the election. This was backed up by the optimism regarding more residential construction under the new government. Commenting on the situation, NAHB Chairman Carl Harris, stated:
“With the elections now in the rear view mirror, builders are expressing increasing confidence that Republicans gaining all the levers of power in Washington will result in significant regulatory relief for the industry that will lead to the construction of more homes and apartments”
Although the sentiment around construction has improved, the market continues to be subject to various challenges including elevated materials costs, a limited supply of building lots, and labor shortages. A negative consequence of Trump’s administration could also be the planned deportation of immigrants, considering the fact that the construction market is one of the biggest employers of immigrant workers.
A close-up of a worker welding a steel product, showing the precision and craftsmanship.
Our Methodology
In order to compile a list of the 10 best construction materials stocks to buy now, we first use a stock screener to make an extended list of the relevant companies with the highest market caps. Moving on, we shortlisted the top 10 stocks from our list which had the highest number of hedge fund holders. The 10 best construction materials stocks to buy now have been arranged in ascending order of their hedge fund holders, as of Q3.
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).
Commercial Metals Company (NYSE:CMC)
Number of Hedge Fund Holders: 19
Commercial Metals Company (NYSE:CMC) provides products and technologies to cater to the critical reinforcement needs of the global construction sector. The firm maintains facilities across the United States, Europe, and Asia. Although CMC’s products are renowned, its vertically integrated business model puts it on the map. The company was the first steel manufacturer to introduce vertical integration in the US. 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 made it revolutionize the steel industry.
CMC is an industry leader. 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 bars, steel fence posts, and wire rods.
Commercial Metals Company (NYSE:CMC) closed fiscal 2024 as a solid year. Highlights include the third-best financial results in the firm’s 109-year history and record employee safety performance for the second consecutive year. The fourth quarter results were impacted by macroeconomic and political uncertainty, especially regarding the US interest rates and the outcomes of the election. However, underlying demand fundamentals remain robust due to structural trends of infrastructure investment, electrification, re-shoring of manufacturing, and the need to cater to the housing shortage in the country.
Therefore, Commercial Metals Company (NYSE:CMC) has leading positions in core products and geographies and a vertical structure that optimizes returns through the value chain. As of Q3, the stock is held by 19 hedge funds and ranks among the best construction materials stocks to buy now.
Overall, CMC ranks 7th on our list of best 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 time frame. 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.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
Disclosure: None. This article is originally published at Insider Monkey.
