Looking to put new money in the market and trying to build my portfolio on a stable foundation, I find myself thinking about concrete.
The top three cement companies are all headquartered outside of the United States. The number three producer CEMEX S.A. B de C.V. (ADR) (NYSE:CX) is in near by Mexico and the number one producer LaFarge ADS (NYSE:LR) is French owned. The number two producer is a great Swiss company, HOLCIM, but its shares are only traded over-the-counter on the so-called "pink sheets," and those I won't touch.
Both of these companies have had a great run the past few years with a major presence in the U.S. They are expanding rapidly internationally and taking advantage of developing economies In Asia. LaFarge is at a 52 week high closing yesterday at $39.02 per share while CEMEX is about 10% off it's high closing yesterday at $34.92 per share. The charts below cover the last five years. I do look at charts but am seeking value and do not believe in technical analysis. There is some merit to this view but it is way too limited for me.
This is the chart for LaFarge:
These are two fundamentally sound companies but there are some basic differences in the details. LaFarge pays almost a 3.5% yield which I love, and has a low P/S ratio of 1.3 and a reasonable P/B ratio of 1.93.
CEMEX does not pays a dividend annually in May of each year and I think it should. Th dividend is not consistent however, it has been expanding and I'm sure it believes the acquisitions and business growth are the reward to investors. Evidence of this can be found in its return-on-equity (ROE) 25.54 vs 11.84, return-on-assets (ROA) 11.5 vs 5.52, and return-on-invested-capital (ROIC) 14.76 vs 7.12 that are all approximately double that of LaFarge. The data are trailing figures linked above.
If I was buying today I would be more comfortable with CEMEX and its growth, and sacrifice the dividend for now. I also think it will benefit more from infrastructure development in California in the tens of billions of dollars scheduled for the next decade. If LaFarge was not at an all time high I might be more intrigued. In either case these stocks should both be on your watch list. I might buy a little of both now and keep a close watch to pick-up more later. Ideally from a value perspective they need to come down closer to $30 per share for me to jump in with both feet. Cement shoes anyone?
Sheldon Liber is the CEO of a small private investment company and the vice president for design and research at an architecture & planning firm. Check out his other posts for BloggingStocks here
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Reader Comments (Page 1 of 1)
3-23-2007 @ 6:38PM
Sheldon L said...
Thanks John, corrected above and noted here. AOL does not indicate a dividend or yield. The payout is once a year in May. Last year CX paid $2.83 and each of the five years prior to that it was about a buck.
3-23-2007 @ 11:17PM
John said...
Cemex does pay dividends see: http://www.cemex.com/ic/ic_si_di.asp for summary of past dividends.