"I think we have bottomed in some sectors, including commodities and materials," explains Glenn Rogers.
In Internet Wealth Builder, he says, "President-elect Obama will pour hundreds of billions into projects. The Chinese and the Europeans have also committed huge amounts to infrastructure." To play this trend, he looks at Cemex (NYSE: CMX).
"If you want to venture back into the stock market at this point and you're a long-term investor, my advice is to buy high-quality names with low P/E ratios, no debt coming due next year, and the sustainable ability to pay a dividend.
"Late last month, this Mexican cement giant traded as low as $4.01. Then President-elect Obama announced his plan to spend billions on infrastructure projects and guess what happened?
"The share price shot up on the expectation that infrastructure spending will translate into a growing demand for cement.
"Cemex shares traded as high as $11.35 before pulling back to close the week at $8.16. That's still more than double the November low but this is a stock that was trading at over $30 last June so it still looks like good value at this level.
"Cemex is one of the largest integrated building materials companies in the world, operating in over 50 countries across five continents. Basically, they sell a lot of cement (96 million metric tons in 2007) and it's very hard to build highways and bridges without cement.
"Last year, they had sales of over $21 billion with EBITDA of $4.6 billion earnings per share of $3.22. Unfortunately, they bought Australian-based Rinker Group in July 2007 and, given the current conditions, probably paid too much but as things improve it will be a good asset for them.
"Also, President Hugo Chavez of Venezuela nationalized their operations and they are still waiting for compensation. Don't hold your breath on that one!
"Beyond that, the company has been shedding some assets to reduce debt levels, which are way too high. In fact, The Wall Street Journal just ran a story highlighting the debt levels of Cemex and the stock took a hit as a result.
"In the latest quarterly financial report, Cemex reported a 5% year-over-year decline in sales and a 4% drop in EBITDA to $1.3 billion, due mainly to the exclusion of the Venezuelan operations. Net income was down 74% to $200 million. On the positive side, net debt was reduced by $1.2 billion during the third quarter.
"Cemex paid an annual dividend of 84c a share in May of this year. However, the amount of the dividend is set each year by the directors and so will fluctuate depending on the company's profitability. Next year's dividend, if there is one, will undoubtedly be much less.
"I've recommended Cemex before. Now it is time to get back in again. (Disclosure: I started buying shares for my personal account at around $5 and continue to add on dips.) A couple of years from now, $8.16 will look like a terrific bargain."
