Spot the Next Outbreak of Material Madness

As the largest U.S. producer of construction materials, this $11.1 billion market-cap stock was up 58% over the last 12 months. By reinvesting in growth and utilizing a more efficient capital structure, this high-cash-flow business should outperform industry peers and the overall market.

Organic growth comes from the public works, highway and nonresidential construction end markets, all of which have been growing more rapidly than the overall economy. Geographically, Vulcan is positioned to serve Georgia, Florida, Texas and California markets, which are growing faster than the rest of the U.S.

For example, California voters approved the funding of $43 billion of infrastructure bonds that should eventually emerge as tangible projects utilizing Vulcan aggregates.

The company continues to add material reserves via acquisitions and is a beneficiary of the ongoing consolidation trend in this business. The top 10 producers of aggregates account for only one-third of overall production. On Feb. 19, Vulcan announced that it will buy Florida Rock Industries (FRK Quote) for $4.6 billion.

This deal increases Vulcan's reserves to about 45 years of production and reinforces its critical mass in Florida and the East Coast. While the deal does not change earnings guidance, over the next three years the $2 billion of projected cash-flow generation should help the company pay down the debt it will take on as part of the deal.

The net effect is a rock solid company that should reward shareholders. Year over year, Vulcan has rewarded shareholders with a 56% total return.

Real basic values.