Vulcan Materials: A Good Buy/Takeover

| About: Vulcan Materials (VMC)

Vulcan (NYSE:VMC) is an interesting company that has more or less returned to its roots by focusing on cornerstone building materials. Founded in 1909, VMC, based in Birmingham, AL, with strategic locations nationwide and in Mexico (serving Houston, New Orleans and Tampa) provides infrastructure materials that are required by the American economy. Vulcan is the nation's largest producer of construction aggregates, a major producer of other construction materials including asphalt and ready-mixed concrete and a leading producer of cement in Florida.

VMC produces aggregates, primarily crushed stone and gravel, that are used in nearly all forms of construction. In particular, large quantities of aggregates are used to build roads and nonresidential properties.

Vulcan has had a trading range of $49.39-$100.71 over the past 52 weeks. Presently it sits at $64.19. Sporting a dividend of 3.05%, this $7B company has been trading more heavily in recent weeks. The stock has become a more price fluctuating security since joining the S&P500 - and since foreign companies have been buying aggregate companies in the U.S. due to the cheap dollar and national infrastructure needs that must be addressed. High commodity costs have hurt the stock price. Cutbacks in state and local spending on infrastructure - especially roads - have also taken their toll.

It is my belief that Vulcan shares are significantly under priced going into the upcoming tax and spend cycle. This is certainly not going unnoticed across the ponds (west and east). VMC could find itself receiving a hefty offer from foreign buyers with a keen eye for value. I price a takeover of Vulcan at approximately $85-90/share based upon the outstanding business model and the reputation of Vulcan for delivering vital materials in a timely, cost effective manner. Yes, there is value in "them thar" rocks.

Vulcan is a company that has compiled a rich history as an American success story, founded by an attorney from Ohio who saw value in southern slag. VMC should be receiving your attention as an addition to the materials sector of your portfolio, perhaps before they receive an offer that cannot be refused.

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Tagged: , General Building Materials
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