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

i hear buildings have concrete in them. and apparently buildings have been a very popular thing for the last few millenia (using concrete for the last 2). Now i understand that people have to stop making buildings because the press says that people can't afford to live in them anymore (and won't for the next 2 millenia either). So i'm crazy for picking this instead of a tent manufacturer b/c the subprime mess has completely eliminated our need for concrete.

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.

Cement is an industry that will be booming in India, Russia, South America, and China (Along with other areas), and Cemex has operations in all of those places. A 100-year-old company with increasing income, high EPS, low P/E compared to the industry average, and the price has recently taken a hit. I see a great opportunity here for the long run as long as cement stays in high demand.

Cement... certainly not hip, flashy, or trendy. Actually, it's downright boring if you ask me.

But this boring company grew earnings at over 25% from '04 to '05, and grew cash flow from operations by over 50% for the same period - and is in a prime position to benefit from continual increases in construction in emerging markets.

I'll take that kind of boredom any day.

Initially a relative small Mexican cement company that has turned global and not so small anymore. It will dominate the US Cement market and it has India and China markets as its grow pathsince it currently does not play in these regions.

There are so many reasons to own CX at these prices I find it difficult to contain my enthusiasm. The opportunity to purchase such a wonderful business at less than half a conservative estimate of its intrinsic value will not last long, it never does. Fear and undertainty concerning the cyclical downturn within its largest markets has resulted in the chance for investors to own a great business at an absurdly low price.

The market is currently pricing CX as if it will never never grow again, which is just absurd. A recovery in its end markets may not come quickly, but for a variety of quantitative and qualitative reasons odds are it will eventually come. When it does, its a safe bet that CX will continue to do what it has always done...A recent TMF analysis put it this way, "Cemex use its scale, as well as its technological and investment know-how, to create a cash producing, cross border juggernaut that gains more advantages over its competitors as it grows." That's about right. CX operates in an increasingly ologopistic industry with high barriers to entry. It has increasing pricing power, and more importantly has the capacity to continue to consolidate their competitive position through value accreting aquisitons, grinding out gobs of free cash in the process.

Management has a long paper trail of operational excellence...too lengthy to regurgitate here. One example is their ability to time and again effectively capture the significant arbitrage between the low purchase prices of fragmented private (less efficient) competitors and the significant advantages provided by CX's scale. Their relatively rare ability to consistenly wring out excess profits from their aquisitions has resulted in high free cash generation, and consistent operational/margin improvements as they have grown over time...driving tremondous value creation a long the way.

If the past is in any way a reliable indicatior of CX's future, investors purchasing at today's prices will reap extraordinary risk adjusted returns over the next 3, 5, 10, and even 20 years.

Bottom line, as the quarter

Cemex is one of the largest providers of cement, not to be confused with concrete, in the US. If Congress does actually move on infrastructure rebuilding, and though the if is small, the when is huge, so when they do, CX should see a very nice move to the upside.

Cemex is primarily involved in the business of producing cement, ready-mix concrete, aggregates and clinker. Having an installed cement capacity of 98.2 million tons, it is the third largest cement producer in the world. The company operates in most of the large markets across the globe, with the U.S. and Mexican markets contributing over 40% of the revenues. Cemex is also involved in trading of cement and clicker, where about half the traded volume is purchased from third party vendors.

The cement industry is globally dominated by few large players, holding production plants spread at significant markets. As the industry requires huge capital investment and high lead time, acquisitions are seen as key strategy for capacity expansions. Growth in the cement industry is highly correlated to housing and infrastructure development. At present the rising input cost and U.S. housing market slowdown is affecting companies like Cemex and Lafarge. The long term outlook of the industry appears strong with booming infrastructure and housing sectors in developing markets.

The Mexican major is currently witnessing a strong setback, with massive drop in cement, ready-mix and aggregate volumes in the U.S. market. Looking ahead in 2007, the reduced volumes in U.S. are likely to continue, as housing market slowdown is estimated to prolong till 2008. Adding to it, with Cemex’s $12 billion offer to acquire Rinker Group, the Australian heavy building materials major, is in doldrums with Rinker rejecting the bid. Cemex will have to find a different route to attain inorganic growth. Moreover, considering company’s increasing debt levels, due to recently raised $750 million by selling its bonds, which was done to fund Rinker acquisition; the difficult market conditions; and slow organic growth, it is better to stay away from the stock. However the rising cement prices gives a respite for the makers, yet in the short run, the fixed capacity of the company and lack of any significant inorganic growth makes it very difficult for Cemex to beat the benchmark.

CX has product demand that is over and above the product delivery for the next several years. The recent building in China and India will now be supplimented with the reconstruction requirements of the middle east after the recent war. CX has ample business within the US and that business continues to grow.

It's no secret: The construction business is hurting right now, especially in the United States. Fortunately, that reality gives us a chance to buy Cemex at a reasonable price. Doing so puts your money in the hands of a group of talented, candid, and shareholder-minded managers. The downturn is giving Cemex a wonderful opportunity to consolidate a fragmented industry and grow market share. Moreover, the global diversification of Cemex's business will shield them from any major slowdowns in any particular market. This is a quality business that will absolutely outperform over the long-run.

I'm taking a flyer on this one, as it's both a Global Gains and a Stock Advisor pick. The fundamentals look strong, and the company is currently investing for the next economic boom. I don't think this will be a stock "on-fire" anytime soon (if ever), but it should consistently outperform the S&P500, especially in the long run.

If the Graduate were being made this year, it would all be about "cement." So put on your cement shoes along with Jimmy Hoffa, fly south of the border and ride the Cemex train. Ride on the train a little further south and pick up some RIO and then you will be on easy street.

CEMEX IS JUST WAITING TO POP. AS SOON AS THE UNITED STATES MAKES IT'S DECISION (WHICH HAS ALREADY AWAKENED TO THE FACT IT HAS TO, IT IS INEVITABLE) TO BEGIN REPAIRING OUR ROADS AND BRIDGES (AND OBABAMA'S SCHOOLS) AMERICANS ARE GOING TO SEE A LOT OF MEXICAN CEMENT COMING THEIR WAY. HOUSING CRISIS WILL SOMEDAY TURN AROUND. OLD BUILDINGS WILL HAVE TO BE REBUILT. THERE ARE SO, SO MANY THAT ARE NO MORE SAFER THAN OUR UNSAFE BRIDGES. THEY WILL HAVE TO BE TORN DOWN.

THE SAME HOLDS TRUE OVERSEAS. OLD ROAD REPAIR AND ESPECIALLY THE NEW NEED FOR MORE HIGHWAY TRAVEL. CEMEX IS WELL POSITIONED ABROAD.

BACK TO THE UNITED STATES. IF THE ABOVE HOLDS TRUE, HOW ARE WE GOING TO GET ALL THIS CEMENT TO THE U S ? OBVIOUSLY BY RAIL. BURLINTON NORTHERN (BNI) MAY BE WORTH CONSIDERING AS ONE TO PROSPER IN THIS WHOLE ENDEAVOR.

ANOTHER PLUS FOR CEMEX- THEY ARE RIGHT ACROSS THE US BORDER. THAT WILL SAVE YA SOME FREIGHT COST. AND WITH BNI RIGHT THERE TO PICK IT UP, THAT IS WHERE YOU ACTUALLY MAKE $ ON THE FREIGHT.

I LIKE TO TRY AND TIE THINGS TOGETHER. HERE WE HAVE TWO TOTALLY DIFFERENT INDUSTRIES PRACTICALLY HOLDING HANDS ON SOMETHING THAT HAS NOT HAPPENED YET (THAT IS THE BEST PART!! AND BOTH THESE STOCKS ARE UNDER PRICED!) YET IT MOST CERTAINLY WILL. IT IS INEVITABLE!!!!

THANK YOU,

GTR

Cemex is growing its international business at a break-neck pace, increasing profitability, and it is valued in Mexican pesos, which is a recovering economy. Oh, and yes, it has a P/E ratio of 9. Sooner or later, Wall Street will wake up to this one.

With the under-developed world doing more and more building, and the US and Europe continuing to need to rebuild infrastructure, this Mexican cement manufacturer stands to gain business rapidly through the next several years.

I've owned CX shares for awhile, but this is another good entry point. Low debt, expanding infrastructure in foreign economies - unaffected by US 'soft' landing. Can I boost returns with dividends and selling covered calls?

free cash flow will allow this company to expand, i love the business too...cement! how simple is that!

Mexico, they are growing independent of the US and they have stabilized the govt problems from earlier. Most SMB type construction is cement blocks. Company has a lock on this business. If you were a Mexican immigrant intending to go back and build a nice house (which describes many Mexican immigrants), you would use this companies products.

This is a success story start to finish. Well run company that we picked while visiting Mexico noting the CEMEX trucks supplying the concrete to FONATUR development sites and hotel construction. The building has not stopped and neither has CEMEX's winning ways. With a PE of under 11 this is still a steal!!