"Our overall outlook is the strongest we have ever seen." When someone says that, you better sit up and take notice. When that someone is the conservative, buttoned-down CEO of Martin Marietta Materials (MLM) , Ward Nye, you might be want to do more than just sit up and take notice.
You might want to buy, especially ahead of when President Donald J. Trump starts talking about doubling infrastructure spend for our decrepit interstates.
Martin Marietta is a remarkable company. It is one of only two pure plays on rocks, or aggregates as they are called, the other being Vulcan Materials (VMC) , which is the larger of the two.
Both are thought of to be pretty much six or half dozen of the other. However, that's a misread. Martin Marietta is huge in North Carolina, South Carolina, Colorado, Georgia, but most important, Texas. Vulcan, on the other hand, is all about the south, from California to Florida.
Martin Marietta offers a fairly consistent set of numbers each quarter vs. Vulcan. I think that's largely because it serves better, more pro-growth areas as well as regions that were hit hardest during the great recession and are now, at last, roaring back.
When I look at the two, I think that MLM has more of a chance to participate in some of the largest road building projects in the country than Vulcan does. I also think it has stronger placement for some of the biggest residential and non-residential construction that's coming, mainly the highly concentrated $47 billion worth of liquefied natural gas plants being built in the Texas area. Martin Marietta pretty much owns the big Texas market, which is the most robust in the country.
Even better, let's cut to the chase. If there is going to be a wall built between the U.S. and Mexico, it is going most likely to be made with Martin Marietta materials, its cement and its concrete. It has all the facilities close by that the Feds need to build the wall fast and build it with less cost -- regardless of whether you think it is right or not.
Now, I know that Martin Marietta has the ability to buy back a quarter of its stock as part of an existing deal to acquire its own shares. However, if there really is going to be an infrastructure bill -- which MLM is not using in its numbers -- then it would be wiser for the company to buy up every smaller southern player it can in this piecemeal fragmented industry, than it would be to buy its own stock here.
It's just too good an opportunity to consolidate this fragmented industry.
Martin Marietta's stock has come down nicely from its high of $243 to $215, which I think has wiped out a lot of the post-election frenzy.
If there is anything that does come from Washington beyond some highway construction that is already on the books, you have a terrific opportunity to make some money here, knowing that if the stock trades down, say, 10 points from this level, the company might be in there buying with you.
Perhaps most important, though, isn't whether Trump actually builds the wall or we issue a $550 billion Make America's Roads Great Again retirement bond offering. What matters in this market is the endless perception of change. Will Trump actually be able to get his defense budget passed? Who knows. But in the interim the defense stocks have had a non-stop move.
I think the infrastructure stocks, which have been trading down in tandem with the sharp decline in rates and the comments from Treasury Secretary Mnuchin, are now ready to have their next leg up based on the next roar of rhetoric, and the leader will be Martin Marietta, the cheapest and the best.