Finding a potential Oxstone in the emerging markets cement business

16-Nov-2010

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An eternal optimist, Liu-Yue built two social enterprises to help make the world a better place. Liu-Yue co-founded Oxstones Investment Club a searchable content platform and business tools for knowledge sharing and financial education. Oxstones.com also provides investors with direct access to U.S. commercial real estate opportunities and other alternative investments. In addition, Liu-Yue also co-founded Cute Brands a cause-oriented character brand management and brand licensing company that creates social awareness on global issues and societal challenges through character creations. Prior to his entrepreneurial endeavors, Liu-Yue worked as an Executive Associate at M&T Bank in the Structured Real Estate Finance Group where he worked with senior management on multiple bank-wide risk management projects. He also had a dual role as a commercial banker advising UHNWIs and family offices on investments, credit, and banking needs while focused on residential CRE, infrastructure development, and affordable housing projects. Prior to M&T, he held a number of positions in Latin American equities and bonds investment groups at SBC Warburg Dillon Read (Swiss Bank), OFFITBANK (the wealth management division of Wachovia Bank), and in small cap equities at Steinberg Priest Capital Management (family office). Liu-Yue has an MBA specializing in investment management and strategy from Georgetown University and a Bachelor of Science in Finance and Marketing from Stern School of Business at NYU. He also completed graduate studies in international management at the University of Oxford, Trinity College.

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By Liu-Yue (Louie) Lam, Oxstone Capital Management,

CX, Cemex – Mexico, $9.31, 11/10/2010
CEMEX is the world’s 3rd largest cement company. The company is truly global with operations in every region around the world. CEMEX was founded in 1906 and is considered the corporate national pride of Mexico. It is highly regarded for its use of technology and innovation in the cement industry and for its terrific management team.
However, an ill timed expansion strategy left it with a mountain of debt. But expect bankers and governments to play nice with Cemex since it’s one of those ‘too big to fail’ businesses and is also a strategically important business in Mexico. I believe due to Cemex’s symbol as a national pride – a home grown global corporate giant, the government will never let Cemex fail.

This past summer my lovely wife and I honeymoon in Croatia and across the Balkans. I could not help but notice the numerous Cemex cement plants dotting the landscape among the beautiful sea side views. Cemex is there because it sees great potential in doing business with many emerging market economies including south east Europe. In addition, Asia and Africa presents enormous opportunities for infrastructure development for years to come. Cemex is a perfect leverage play on the global economic recovery story and on the emerging markets infrastructure development story. A review of the institutional holders includes very highly regarded value investing giants such as Dodge & Cox and LongLeaf Partners.

Although, heavy with debt, Cemex will not fail. In this situation Crisis = Opportunity. Cemex is still a world class company with several competitive advantages including state of the art technology and dominant market positions in its home court – Mexico. It continues to receive favorable low cost energy supplies from Mexico. Trading at only 57% of book value there’s plenty of margin of safety. It is currently trading near 52 weeks low and decade lows. I believe Cemex will provide plenty of upside rewards for the investor with time and patience.

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