JUNE 13, 2018, BUY 1000 SHARES OF CX @ USD$6.13 (less than 1% of the portfolio)

Cemex S.A.B. (NYSE:CX) is a leading global producer of cement products. Based in Mexico, revenues are global, derived from the U.S. (30%), Northern Europe (23%), the Mediterranean (10%) and South America and the Caribbean, 12%.

During the boom times of 2006-2007, CX’s share price was around $30/shr, and in 2011 debt levels peaked at over USD$16 billion, while net equity went as low as USD$8 billion in 2015.  I’ve bought 1000 shares of Cemex at about USD$6.00/shr, which is just slightly higher than book value and less than 10x earnings. In short, I believe CX is a solid bargain.   CX is punished for their Mexican-heritage. Not a day goes by without the leader of the largest global economy threatening economic penalties on Mexican firms.  Given that CX derives 30% of its sales from the US, I acknowledge that the threat is real. However, cement products are mainly produced and sold within the market it serves, and, given the high barriers to entry (NIMBY-ism makes it real tough to set up quarries) I expect CX’s pricing power to improve. To wit, CX margins have improved in each of the past 4 years and are approaching 23%, still a few percentage points off their pre-recession levels of 26%. Debt continues to get worked off and is expected to be below USD$9 billion by the end of 2018; the company produces over USD$1/shr in free cash flow.

Currently, CX represents 0.5% of the portfolio, however, I may increase it.