Vulcan Materials

Vulcan Materials (VMC) produces construction aggregates and other construction materials. Sellers Capital thinks the company is worth US$85 a share, compared to a current share price of US$75 (compared to US$70 when the original analysis (pdf) was done).

The US$85 estimate is the expected value from three scenarios

  1. Pessimistic: US$60 a share with 30% probability.
  2. Most likely: US$90 a share with 55% probability.
  3. Optimistic: US$105 a share with 15% probability.

Summary of their investment thesis:

  • Aggregate is a wide moat business.
  • America’s infrastructure is poor and needs a investment of US$1.6 trillion according to the Society of Civil Engineers.
  • Worst case is flat growth for building infrastructure.
  • Demand for aggregates not dependent on residential housing.
  • The last three decades has seen growing volumes in aggregates.
  • Scarcity = increased pricing.

Perceived Problem: Volumes will decrease due to lower public expenditures and bad housing and commercial markets, and prices will decline.

Sellers Capital View: Volumes will decline slightly, pricing will be stable to increasing.


One Response to Vulcan Materials

  1. […] America’s Infrastructure The Economist has an article about the current infrastructure in America. The article contains some of the same figures which Sellers Capital use in their VMC investment thesis. […]

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