Build Your Portfolio with Construction Stocks
Construction companies such as CRH, Berkeley Group and Vinci are good long-term buys at current valuations, following government intervention to backstop the global banking sector, analysts told CNBC.com.
"If you have a longer time horizon, then I believe these stocks offer a great buying opportunity, especially if you are looking at the quality names in the sector," Tobias Woerner, analyst from MF Global, said while warning of high volatility in the near term.
CRH has "an amazing track record, strong balance sheet and strong management team," Woerner told CNBC.com. But its exposure to the US, UK and Ireland have dented its stock price heavily, he said..
Berkeley Group also has an "outstanding management team" and strong balance sheet and investors willing to take on more risk, while wanting to play the cyclical theme should look to the UK's Wolseley, Woerner said.
French construction company Vinci is well positioned to withstand a recession, Charles-Edouard Boissy, construction analyst at Oddo Equities, told CNBC.com. It has a large back-log of relatively secure public contracts and is flexible to market movements, he said.
Boissy also singled out Eiffage and Saint Gobain as good picks, while pointing out that it is difficult to tell exactly when the sector will turn around as it's impacted by numerous external factors.
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The Dow Jones construction index has lost over half of its value in the last 12 months.
Governments and central banks around the world have stepped in to try boost bank balance sheets and ease interbank lending, which Woerner said will help turn around the sector's standing in the stock markets.
"On a six month time horizon they should start to rally again but the volatility is very high," Woerner said, adding "we have been given a hand by the state."
The positive outlook depends on the continued easing of interbank lending, Woerner added.