Knife River Corporation (KNF): A Top Pick in Cement and Construction Materials Stock

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 Knife River Corporation (NYSE:KNF) stands against other best cement and construction materials stock.

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 worker in a safety helmet and bright orange vest surveying a construction site from a crane.

Number of Hedge Fund Holders: 37

Knife River Corporation (NYSE:KNF) is an aggregates-based construction materials and services company. The company supplies aggregates, ready-mix concrete, asphalt, and contracting services in the United States. It is vertically integrated with operations spanning 14 states.

The company has the privilege of being one of the nation’s largest construction materials and contracting businesses which has 188 aggregate sites totaling over 1 billion tons of reserves. It is among the largest producers of sand and gravel in the US. KNF’s growth history is strong with over 85 acquisitions in the past thereby being the acquirer of choice in its midsized high-growth markets. To drive long-term profitable growth, the company is pursuing the EDGE strategy which refers to EBITDA margin improvement, discipline, growth, and excellence.

The second quarter remained promising for the firm with a good start to the construction season. Knife River Corporation (NYSE:KNF) saw a record second-quarter revenue of $806.9 million, net income of $77.9 million, and adjusted EBITDA of $154.3 million. Adjusted EBITDA margin also grew by 240 basis points, on a trailing twelve-month basis through June 30. The firm is also considering potential acquisitions across its segments which are focused on materials-based businesses.

Market conditions are an additional pro with lawmakers in eight of Knife River’s fourteen states introducing additional legislation to fund construction projects. The company also hopes to benefit from the Infrastructure Investment and Jobs Act, with 56% of its funding still to be obligated in KNF’s market areas.

Knife River Corporation (NYSE:KNF) is a leading construction materials company with a beneficial combination of products and services amidst favorable market conditions and future growth opportunities. The company ranks among the best cement and construction materials stocks to buy now.

Overall, KNF ranks 4th on our list of Best Cement and 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 timeframe. 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.

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Disclosure: None. This article is originally published at Insider Monkey.