A Mexican Play on Cement

Focus: GLOBAL

Charles Mizrahi Image Charles Mizrahi Editor, Park Avenue Investment Club and Inevitable Wealth Portfolio

For investors comfortable with the risks associated with buying stocks on a foreign exchange, Charles Mizrahi, editor of Insider Alert, looks to a Mexican-based cement producer.


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I have been researching companies that are dominant in their industry, usually with little to no competition, trading at bargain prices, and located outside the U.S.

When we started researching international stocks, one company jumped off the pages at us — and we decided that would be our first international stock selection.

Grupo Cementos de Chihuahua SAB de CV (GCC) has seven cement plants, three of which are in its home state of Chihuahua and four of which are in the U.S.

GCC’s Mexican operations are far more profitable than U.S. operators’, due to an oligopolistic market structure and weak anti-trust enforcement.

Of the six cement producers in Mexico — Cemex (CX) is the biggest with 50% market share — GCC is relatively small with a 4% market share.

However, market share isn’t everything when it comes to cement. Land transportation is one of the biggest costs in cement production due to cement’s heavy weight and relatively low value.

This results in regional markets that are dominated by a few companies.

 
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