Why two little-known materials stocks are up 50% this year

One small corner of the materials sector is flying high.

The S&P 500 materials stocks have tumbled more than 12 percent year to date, hit by falling commodity prices and concerns about global growth.

But construction materials stocks Martin Marietta Materials and Vulcan Materials are actually two of the best performers in the S&P this year, beaten only by popular tech picks Netflix and Amazon.

Stifel analyst Stanley Elliott said the performance of such companies is exclusively focused on domestic growth, which is one reason why these stocks have been on the rise. Construction materials stocks won't see the same impact as the rest of the materials sector from global markets, currencies and commodities, Elliott said.

Additionally, infrastructure spending in both the public and private sectors are growing, he said.

"There hasn't been a silver bullet, if you well, but there have been several things all trending in the right direction," Elliott said Thursday in a phone interview.

According to Elliott, state and local infrastructure funds are seeing a boost in revenue streams from healthier budgets, gas and sales taxes and public-private partnerships in the form of toll roads.

Elliott is also watching the process of a six-year highway bill that was passed by the Senate this summer, which would aid visibility and planning in construction projects, as well as improve confidence. Although the bill has yet to pass in the House, the prospect of a more long-term plan is "at least encouraging," he said.

Read More U.S. House Republicans plan 3-month highway bill, no trade bank renewal

Growth has been even better on the private side, Elliott said, which has seen increased construction of residential properties, commercial properties, hospitals and other buildings.

However, Elliott said much of the growth has been recovery from a post-recession plunge.

"This is an industry that has fallen from peak 40 percent in some markets [since the recession]," Elliott said. "What we've seen so far has been an inflection, as opposed to growth above a normal trend."

Read MoreUS housing starts approach eight-year high in July

But Erin Gibbs of S&P Capital IQ said there should be plenty of room left to run for Martin Marietta and Vulcan in particular, which expect to see earnings growth in the mid-teens by next year.

"These guys look good both from a valuation perspective, and they're fundamentally growing," Gibbs said Wednesday on CNBC's "Trading Nation." "Valuations are trading below their historical averages, they're below the analyst consensus target prices."

Want to be a part of the Trading Nation? If you'd like to call in to our live Wednesday show, email your name, number and a question to TradingNation@cnbc.com.


Trades to Watch

Trader Bios


Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

Read more