Morgan Stanley is maintaining its Buy rating on this largest cement maker in Latin America, noting that Mexico is in the recovery stage.
CEMEX (CX)
from Positive Patterns
CEMEX (CX) is the epitome of a cyclical stock. Right now, CX is coming off a very bad 6-year stretch, but already things are looking better. Northern Europe, where CEMEX has significant operations, should do much better the next few years and contribute positive cash flow. Mexico, which has been slow, should pick up the pace at a noticeable rate in 2015 on a better political climate for business, and the US market, where CX also has significant operations, is already seeing upticks. This should just be the beginning of the up-cycle that is underway.
CEMEX is risky, but I do think there is very good upside potential here. Estimates are for break-even this year, with cash flow of about $1.00 a share fiscal 2014. Things could turn around very quickly at CX, and by 2015, this could be a much better place to be. I would buy it up to $13.00, but not much past that. I think the next 3-5 years and maybe even longer will be exciting, and CEMEX can at least get back to the old highs in the mid-thirties. This is a trade with excellent upside potential, and the story makes sense. I like Mexico and think they will see a much better economy the next 5-10 years.
Bob Howard, Positive Patterns, P.O. Box 310, Turners, MO 65765, 417-887-4486, May 2, 2014