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 Knife River Corporation (NYSE:KNF) 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 worker in a safety helmet and bright orange vest surveying a construction site from a crane.
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).
Knife River Corporation (NYSE:KNF)
Number of Hedge Fund Holders: 33
Knife River Corporation (NYSE:KNF) is an aggregates-based construction materials and services company. The company provides construction materials and contracting services in the western, central, and southern United States. It is vertically integrated with operations spanning 14 states.
Aggregates are the foundation of KNF’s business. The firm serves as one of the nation’s largest construction materials and contracting businesses which has 188 aggregate sites totaling over 1 billion tons of reserves. Other than being a leading supplier of construction materials, KNF performs construction in 12 of its 14 states, through a business mix heavily weighted to public-sector projects. Thus, this combination of products and services has been beneficial for the company over the years.
Third-quarter results remained promising for Knife River Corporation (NYSE:KNF) as it posted record third-quarter revenue, gross profit, and net income. The firm also expects to generate an attractive financial return through acquisitions. KNF has deployed $129.3 million of capital on six acquisitions, with a focus on aggregate reserves and construction materials, through November 2. To drive long-term profitable growth, the company is pursuing the EDGE strategy which refers to EBITDA margin improvement, discipline, growth, and excellence. The strategy remains intact with ongoing growth, pricing optimization, and cost control. With record or near-record budgets at most of its state departments of transportation, KNF is also finding opportunities to bid on projects across its footprint.
Thus, Knife River Corporation (NYSE:KNF) is an aggregates-led, vertically integrated construction materials and contracting services company that is currently favoring a competitive EDGE strategy as well as a strong public funding backdrop.
Overall, KNF ranks 4th on our list of best construction materials stocks to buy now. While we acknowledge the potential of KNF 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 KNF 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.