Vulcan Materials Company (VMC): 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 Vulcan Materials Company (NYSE:VMC) 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 construction site with a truck and crane unloading the company's materials.

Number of Hedge Fund Holders: 40

Vulcan Materials Company (NYSE:VMC) is a major producer of aggregates-based construction materials including asphalt and ready-mixed concrete. Vulcan has an old history as it became a publicly traded company with trading starting in 1957. The company is headquartered in Birmingham, Alabama.

Vulcan is the leading supplier of aggregates which are essential to infrastructure, growth, and construction. The firm has an unmatched coast-to-coast footprint that spans the high-growth US markets. The firm has shown resilience despite the external market conditions. Vulcan’s focus on aggregates presents it with favorable fundamentals in the form of a diverse end-market demand with aggregates used in all kinds of construction, limited product substitutions, attractive pricing characteristics, and high barriers to entry. The demographics also help drive growth as Vulcan serves states that are advantaged for better growth in population, employment, and household.

Vulcan Materials Company (NYSE:VMC) closed the fiscal second quarter with record earnings growth and margin expansion. The aggregates cash gross profit per ton increased 12% year-over-year while the gross profit margin expanded 120 basis points, year-over-year. Thus, the firm’s aggregates-led business remained durable and performed despite the rainfall impacting construction activity during the quarter.

The prospects for growth remain favorable with a uniquely positioned aggregates business, proven expertise, a compelling footprint, and favorable market dynamics. During the last 10 years, Vulcan Materials Company (NYSE:VMC) has completed almost 40 acquisitions across its top 10 revenue states and is poised for expansion.

Overall, VMC ranks 3rd on our list of Best Cement and Construction Materials Stocks to Buy Now. While we acknowledge the potential of VMC 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 VMC 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.