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Sally Jones
Sally Jones
Articles (580) 

Mason Hawkins and Gurus Ditch Gravel

March 11, 2013 | About:

On March 6, 2013, Mason Hawkins, chairman of Southeastern Asset Management, reduced his shares of Martin Marietta Materials (NYSE:MLM) by 21.96%, with his current shares now at 4,362,121. The current price of MLM is $104.7, with a change from average of 3%. Since December 2011 Martin Marietta Materials has attempted to buy out Vulcan Materials Company (NYSE:VMC), first making a hostile takeover bid of $4.8 billion for VMC at $36.69 per share, followed by an unsolicited offer of $5.5 billion in May 2012 at $42 per share. According to the Birmingham Business Journal, Vulcan Materials got an injunction blocking Martin Marietta Materials from pursuing a hostile takeover. The Vulcan position was that the MLM offer undervalued the company and was too optimistic about the possible merger benefits. Time will tell if MLM will offer a higher price in a friendly takeover.

Meanwhile, it looks like many investor Gurus are unloading aggregates and basic materials companies MLM and VMC for now. Gurus Ray Dalio and John Griffin sold out their MLM shares in December 2012, and Steven Cohen reduced his MLM by 96.44%. In the last quarter of 2012, investor Gurus Bruce Kovner, Jim Simons and Tom Russo sold out their stakes in VMC. Currently, Steven Cohen has only 8,744 shares of his VMC stake after his reductions in third quarter 2012. Here’s an in-depth analysis of Vulcan Materials Company.

A recent GuruFocus checkup on MLM shows that Martin Marietta Materials revenue has been in decline by 8.7% for the last five years, and the gross margin has been in long-term decline with the average rate of decline per year at 7.4%. The company’s operating margin has been in a five-year decline with an average rate of decline per year at 13.8%. Cash flow from operations shows a severe divergence from the reported net income, which may suggest that the company is not receiving payment from its customers or it has other activities affecting its cash flow.

The GuruFocus checkup also found three medium warning signs: The MLM stock dividend yield (1.53%) is close to three-year low of 1.53%. The MLM price ($104.88) is close to 3-year high of $104.88, and the MLM P/S ratio (2.3663) is close to five-year high of 2.59. See MLM history here.

Martin Marietta Materials, Inc. was formed in 1993 as a North Carolina corporation to serve as successor to the materials group that is now Lockheed Martin Corporation. The MLM company is a producer of aggregates for the construction industry, including infrastructure, commercial, agricultural and residential. Martin Marietta Materials also has a Specialty Products segment that manufactures and markets magnesia-based chemical products used in industrial, agricultural and environmental applications. MLM also sells dolomitic lime mainly to customers in the steel industry. The company operates in four reportable business segments: the Mideast Group, Southeast Group, and West Group, and collectively the Aggregates business and the Specialty Products segment. Mason Hawkins’ holding history of MLM looks like this:

As of Feb. 29, 2012, Martin Marietta Materials owns, has the right to use or has pending applications for approximately 98 patents pending or granted, and approximately 107 trademarks related to business.

Here is a summary of trading activity at Southeastern Asset Management:

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About the author:

Sally Jones
Sally Jones writes about Real Time Picks. She says, "I truly enjoy watching the Gurus in realtime and telling their story."

Rating: 3.5/5 (4 votes)


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GuruFocus has detected 1 Warning Sign with Martin Marietta Materials Inc $MLM.
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