Cemex S.A. B de C.V. (ADR) (CX)

Bruce1967 (< 20) Submitted: 1/5/2008 4:24:14 PM : Start Price: $24.74 CX Score: -35.03

Here's a great company, operating in Mexico, US, Spain, Europe and the Middle East. Selling one of modern life's basic necessities - Portland Cement concrete.

M. Market is really worried that the slowdown in the US housing market is going to really hurt Cemex. He has forgetten that concrete is used for other things besides house basements. It is used for road paving, commercial buildings and other heavy construction projects. So the slowdown in the US housing industry could reduce total sales by 5 to 10%.

Mr. Market is currently offering to sell you his shares of CX at a bargain price of about $25 or about 1 times the 2007 book value of $25.70.

Over the last 5 years, book value has grown at an annual rate of about 17 percent and Valueline figures it should continue to grow at about 13 percent. If this all pans out, and you buy the shares at $25, your investment should grow at about 13 percent for the next five years. Add in a 3% annual dividend and you're looking at a pretty decent return of 15 to 16%.

Sometime in the next 5 years, If Mr. Market returns to a more optimistic state of mind, he might offer to buy your shares for 1.5 times book, in which case your return would jump to about 24%. At that rate you would double your money in about 3 years. Warren would be so proud of us !

Safe Harbour Statement:
It is possible that the economic depression of the 1930s could return or Castro could rise from his sick bed, invade Mexico, nationalize Cemex and tell all us blood-sucking parasitic capitalists to get lost, in which case my rosy expectations will not be met.