Construction materials companies are admittedly not glamorous to ASX investors.
They’re not full of future optimism like the technology stocks, nor are they cyclically exciting like mining.
But people and businesses always need housing and buildings, and existing ones always need maintenance and repair. Demand is never lacking.
As such, Ord Minnett senior investment advisor Tony Paterno picked out a couple of ASX shares that he would snap up right now:
269% profit boost? Yes, please
Paterno noted that Brickworks Limited (ASX: BKW) recently posted a stunning improvement in its profit.
“Brickworks reported first half 2022 underlying net profit after tax of $330 million, up 269% on the prior corresponding period,” he told The Bull.
“The company declared an interim dividend of 22 cents, up a cent on a year ago.”
All business units, except for building products in North America, reported “strong earnings growth”, Paterno said.
“In the medium term, we expect company earnings to continue growing on the back of a strong pipeline of work from housing activity in Australia and improving non-residential construction activity in the US.”
Brickworks shares are down more than 5% for the year thus far. The stock dipped last week after going ex-dividend, bringing the price-to-earnings ratio down to less than 5.
Brickworks is handing out a significant 2.61% dividend yield, according to The Motley Fool website.
When the market drives up the price of the product you’re selling
BlueScope Steel Limited (ASX: BSL) is another ASX share Paterno would buy at the moment.
“Steel prices in Europe and the US have moved higher.”
The business is set to enjoy a perfect storm in the steel market, according to Paterno.
“Despite declining from recent highs, spot spreads are still generating an attractive 18% free cash flow yield for BlueScope from fiscal year 2023 and beyond,” he said.
“This highlights that BlueScope remains a high generator of free cash flow despite strong cost inflation.”
It seems Paterno is not alone in his bullishness.
According to CMC Markets, eight out of 11 analysts surveyed rate Bluescope shares as a “strong buy”, with one other rating it as “moderate buy”.
Bluescope shares have remained flat so far in 2022.
