There has been a new wave of volatility in the stock market lately, this time due to President Trump's rollout of trade tariffs. This economic uncertainty has led investors to shift their portfolios, seeking safety and additional upside for the coming months. However, it is easy to get lost in the weeds and complicate a process that should be kept as simple as possible.
With this in mind, investors can look to the way most professionals in the industry come up with their winning ideas: through data. Recent trends in the labor market and the PMI indexes show that the construction sector is about to expand after contracting for a few consecutive quarters. However, not all construction stocks are made equal.
That is because, as investors will see shortly, it is not residential construction that will be in play but infrastructure building materials. This is where stocks like Martin Marietta Materials Inc. (NYSE: MLM), Vulcan Materials (NYSE: VMC), and even Ternium (NYSE: TX) come into play to give investors some of the best plays in the industry today.
More Room to Run for Martin Marietta Stock
Even though this name has reached 91% of its 52-week high today, there are factors left in it that make Wall Street analysts think it has more room to run higher. Investors can see this theme at play through the $648.7 consensus price target placed on it, which calls for a new 52-week high and a 20.5% upside from today’s price.
This view is based on the fact that the construction sector, as quoted in the latest services PMI index, is seeing a boost in demand for American energy infrastructure projects. This directly connects with President Trump’s plan to bring back domestic energy production and may explain why Warren Buffett is also investing in the energy sector.
Knowing that the tailwinds in this name are building on themselves, short sellers have decided that the risk-to-reward is not worth the fight. So, over the past month alone, investors would have noticed a net decline of 5.6% in Martin Marietta’s short interest, a clear sign of bearish capitulation in the face of all these bullish factors.
A Justified Premium for Vulcan Materials
Some value investors argue that high valuation multiples make a stock risky to buy, as the downside could be much greater than the upside left in it. However, seasoned traders and investors will remind them that the market is always willing to pay a premium for the names it believes will outperform the industry and the broader market.
Understanding this market truth, investors should pay attention to Vulcan Material’s current 43.0x price-to-earnings (P/E) ratio, which is a steep premium to the rest of the construction sector’s average valuation of only 24.0x P/E. Now, why would the market bring this stock up to that high of a premium?
The reason is that it is a vital player in infrastructure construction materials, the very same ones that could see a boost in demand soon. Considering that earnings season is in full swing now, investors could expect to hear some positive guidance from management for these companies.
It shouldn’t come as a surprise for investors to see Stephens analysts reiterating an Overweight rating. As of January 2025, Vulcan Materials stock was valued at a high of $325 per share. Again, this valuation calls for a new 52-week high for the stock and a 19% additional upside from today’s level.
Limited Downside, Lots of Upside in Ternium Stock
This Brazilian steelmaker is a very interesting play for investors to consider today, especially as it trades down to only 67% of its 52-week high. The reason is that it serves both the United States and the Chinese markets, two countries that are now looking to expand their infrastructure construction and spending.
Trading this low gives both investors and analysts confidence to see a higher price for this stock as a potential scenario, of course. One that is capped on the downside to provide a fantastic risk-to-reward ratio in today’s volatile market environment. The question is, how much upside can be expected?
With a $47.50 consensus price target for this name, investors can expect a net 58.6% upside in Ternium stock to make it the most optimistic out of today’s list, but one that also comes with an added bonus. Management’s confidence in the future of this company’s cash flows has enabled it to pay up to $1.80 per share in dividends.
At today’s price, that payment would translate into an annualized yield of up to 6% to beat inflation rates and also cushion any further volatility that might come from today’s tariff environment.
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