TRG | The Bottom Line – 9/30

From a TRG perspective, this past week most resembled what life was like pre-Covid. In essence, a busy one: one non-deal road show, two investor days, and a slate of institutional investor and PE meetings in NYC. The market is pricing in a recession, and the feedback from this past week varies widely. Clearly any company with European exposure is bracing for a tough winter ahead, with a structural fastener company sharing that just this week they received a 30% electricity surcharge from one of its EU suppliers. Interface (TILE), a non-res focused flooring manufacturer, shared that catch up work in key U.S. end markets (healthcare, education, hospitality) is keeping the company busy despite all the negative headlines, while acknowledging a tough road ahead for Europe. Were there any silver linings? We think so. Vulcan Materials (VMC) stands out following its investor day. In an environment of structurally higher inflation and rising interest rates, we believe industrial companies will be more attractive (i.e., tech's cheap money is gone). In light of global uncertainty, the U.S. is incrementally more attractive and stable from an investment standpoint in our opinion. Within the U.S., the southeast/southwest will continue to be the driver for population and construction growth. Against that backdrop, VMC is optimally positioned on all fronts and provides a proven track record to support continued growth. The fundamental macro drivers tell a solid investment story for heavy materials producers such as Vulcan.