In June, the argument was made that Wall Street's haircut of Vulcan Materials to $34 from more than $100 was way overdone. So far, that argument looks good, and I'm therefore Reiterating my Buy rating for Vulcan Materials (NYSE: VMC), first recommended on June 3, 2009 at a price of $46.26. If you purchased VMC then, you're up about 19%.
Vulcan's sin: being a leading producer of cement in Florida - a market that tanked big-time, when the housing boom ended. What Wall Street 'forgot,' was that VMC is also a major producer of asphalt and concrete, and that it shipped aggregates to 23 states, as well as to Mexico, the Bahamas, Canada, and Chile.
True, FY2009 revenue will likely fall at least 15-20%, but we're looking down the field (or down the road) to FY2010's revenue rebound. Hence, VMC is a get-ahead-of-the-pack play. The First Call FY2009/FY2010 EPS estimates for VMC are 49 cents to $1.28.
Stock Analysis: Vulcan Materials is a moderate-risk stock. If you've already purchased the company's shares, hold them. If not, consider buying a 25% position in VMC now; then buy another 25% in three months, if U.S. and global economic conditions don't worsen substantially. Under any circumstance, don't buy more than 50% of your VMC position before December 2009. Sell/Stop Loss if you were to buy shares in this company: $22.
Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.
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