Adding Two Stocks: Concrete and Chips
I’m adding U.S. Concrete (NSDQ: USCR) and Integrated Device Technology (NSDQ: IDTI) to the portfolio. Both are special situation stocks with near term catalysts to drive them higher:
Buy U.S. Concrete (NSDQ: USCR) Pave your way to profits with this producer of ready mix concrete. U.S. Concrete has built its way back from a 2011 bankruptcy with soaring sales and profits. Revenue is up 19% in the first nine months of the year. Backlog orders rose 19% and foretell solid numbers.
The company has been laser focused on acquiring and building out concrete plants in high growth geographies. A concentration in Texas, northern California and New York / New Jersey, urban centers enjoying above average commercial growth, has propelled revenue higher.
A burst of federal funding for public roadway projects, including $16 billion in funding for infrastructure just approved in New Jersey and the start of the long awaited LaGuardia Airport rebuild will stoke demand for U.S. Concrete’s ready mix product. Strong free cash flow, steady demand and improving profits lay a rock solid foundation for this stock.
Our roadmap brings the stock up to $80, 60% higher than current levels.
Target $80
Buy Integrated Device Technology (NSDQ: IDTI) Integrated makes communications and timing chips that are used in a plethora of devices. I recommended the stock last March for Growth Stock Strategist subscribers because of its purchase of automobile chip maker ZMDI. The benefits from this acquisition are just starting to show up in its numbers, so the timing of moving it over to Profit Catalyst is perfect.
Enthusiasm for sensors that power smart cars shows no sign of stopping. With ZMDI under its wing the company qualified another production facility as a supplier to Tier One auto manufacturers. Integrated reported an inline quarter on October 31 but investors focused on management’s bullishness over the auto business. Revenue from this sector is expected to grow 15% next quarter as the company begins to recognize revenue from auto design wins.
Although my current target is just slightly higher than current levels, I am re-evaluating the potential for the auto business to determine how high the stock can go.
Target $27
Stock Talk
Edward Getchell
Linda, what is a Tier One Auto and why should I care?
Linda McDonough
Edward,
A tier one automotive supplier is one that supplies product directly to the company manufacturing the autos. Receiving tier one designation is a difficult process that can take several years. IDTI’s purchase of ZMDI, who was already a tier one supplier, gave it a fast track to this approval. These manufacturers buy huge volume of product from suppliers and should be placing some big orders with IDTI for their automotive chips.
Best,
Linda
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Edward Getchell
Linda, isn’t the concrete industry dominated by the French company Lafarge and the Mexican company Cemex? Why should we expect U.S. Concrete to prevail, what is their competitive advantage?
Ed Getchell
Linda McDonough
Edward,
Thanks for the question. Cemex and LaFarge are cement manufacturers. Cement is an ingredient in concrete, the slurry mix that is used in construction. Concrete is notoriously difficult to work with as it hardens within 2 hours of being loaded into delivery trucks. Concrete suppliers must be close to construction site, making it a very local business. This is US Concrete’s advantage- they have built up a strong presence in NJ and NY and then in Texas where building is booming.
Best,
Linda
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