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Tim Brown: Cemex Solid

Cemex is like a good offensive line: When its foundation is solid, it will take you a long way.
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The basis for any winning football team is a solid foundation. By that I mean hard-working, talented players who understand the fundamentals of the game. They know the X's and O's as well as blocking and tackling.

It's true that quarterbacks, running backs and wide receivers are considered the playmakers. They are the ones in the limelight -- they get to score touchdowns and also, since they handle the ball, have the responsibility of protecting the ball. There is no doubt that these are the scorers and teams need top-notch talent at those spots.

However, the foundation of a successful offense is the offensive line. If a team has solid blockers, the quarterback has extra time to make decisions and passes and the running backs have bigger openings to run through. A good offensive line can take pressure off the others on the team and make them better. They are a solid foundation to any good team.

Today, I'm going with a company that knows a thing or two about solid foundations:



. Cemex produces, distributes and sells cement, ready-mix concrete, aggregates, and other construction materials. It markets its products worldwide. The company, with headquarters in Mexico, is the third-biggest cement maker in the world and tops in the U.S. It operates in more than 50 countries and almost 65,000 employees.

I like this company in the long term. Its price is beaten down, but it is a big player in the world of cement and when the housing market conditions improve, Cemex will benefit tremendously.

In its most recent quarter, profits sank by 27%. A slowdown in the U.S. was one of the big reasons. The company also said sales grew by 29%. However, a big portion of that was due to last year's takeover of Rinker Materials. Additionally, the company said that it expects the U.S. residential sector to fall by 30% this year. It had previously estimated a 24% drop.

Yes, there may be some further short-term pain, but the stock is already trading at a deep discount. It closed at $21.33 on Friday and has lost more than a third of its value in the last year. It hit a 52-week low of $20 on Aug. 1. Its highest point in the last year is $33.40.

Why do I like Cemex? For several reasons -- here's a few. First, it has a P/E ratio of just 0.88. Its forward price-to-earnings ratio, a measure of investor confidence, is just 7.46. While common sense would lead most people to think the higher the confidence in a stock, the better. However, that's not so. I'm looking for low forward P/E because that means investors are underestimating the stock. As long as I pick a solid company, there is a good chance I have found a bargain if the forward P/E is low and Cemex is very low. Furthermore, the company has revenue of more than $24 billion and operating cash flow of $4.66 billion.

Like I said, you may have to ride this one out a bit before it comes back around. However, remember, no pain no gain.

Keep moving the chains!

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At the time of publication, Brown had no positions in stocks mentioned, although positions may change at any time.

Tim Brown played 16 seasons in the NFL, where he made nine Pro Bowls. After a brief stint with the Tampa Bay Buccaneers in 2004, Brown retired as an Oakland Raider. He was a Heisman Trophy winner in college for Notre Dame.