Top Picks 2017: Cemex SAB de CV

01/16/2017 6:00 am EST


Peter Mantas

CIO, Logos LP

With Trump now President-elect, my Top Pick for aggressive investors is a way to play both the infrastructure theme and the Mexico trade, notes money manager Peter Mantas, editor of Logos LP Blog.

Cemex SAB de CV (CX) is very interesting at these levels as it seems the market is pricing in a stronger dollar (thereby reducing revenue) and thus lower growth.

Meanwhile, we believe infrastructure will pick up in 2017 (they usually pick up with financials during extended bull runs) and the cement industry is expected to grow by 6-8% globally in 2017.

The company is trading at pennies on the dollar -- 0.5 price to book, 0.3 price to sales, and 2.4 price/cash flow.

Yet, it has higher return on equity, return on invested capital, revenue, gross and operating margins than it did in 2012 (when it was trading at a 50% premium).

Our price target for 2017 is $10.95, which implies a 37% increase from current levels. Given the volatility of this kind of name, this certainly would not be a "buy and hold" kind of stock.

However, we view this as a unique trading opportunity that takes advantage of the growing global cement and infrastructure industry. Look for $6.50 as an entry point, but anything below $7 would still be interesting. 

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Editor's Note: Peter Mantas chose Global Brass and Copper Holdings (BRSS) as his Top Pick for in 2016; the stock has risen 67%. Peter now says, "Despite a great run last year, we believe the name still has room to run in 2017. Expect continued growth in this market as infrastructure and construction picks up. 

"We would caution that if the name does get ahead of itself, taking profits would not be a bad idea later in the summer. Our price target on the name is $45, but wouldn't be surprised if it broke past those levels in 2017."

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