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I believe Brickworks’ long-term thinking makes it one of the best ASX200 shares

Tristan Harrison
Brickworks share price

In my opinion, Brickworks Limited (ASX: BKW) is one of the best ASX200 (ASX: XJO) shares because of the long-term thinking of its management.

The company has successfully become one of Australia’s leading building products businesses with its various brands like Austral Bricks, Austral Masonry, Austral Precast, Bristile Roofing, Auswest Timber, Bowral Bricks and so on.

It’s the long-term thinking that makes Brickworks such a strong business. Construction is inevitably cyclical. Indeed, we’re seeing a slowdown right now across the country. Brickworks is using this slowdown to take brick kilns offline to control inventory levels and complete necessary maintenance. The best time to lower production is precisely during a slowdown, it’s just good planning.

I’ve been impressed by Brickworks’ management decision to invest in the US. Just today it announced another bolt-on acquisition called Redland Brick for up to US$48 million.

In just under a year Brickworks has become the market leader in the north east of the US with the acquisitions of Redland Brick, Glen Gery and Sioux City Brick, with approximately AU$290 million of annual sales revenue.

The US is clearly a good long-term opportunity for Brickworks with a huge total addressable market and the initial targets already being achieved. Bricks could see a large increase of demand here and in the US with structural failures around the world from lower-quality building materials.

Not only does Brickworks’ US investments make sense but the company is also receiving growing rental income from its property trust and growing dividends from its share investment. It’s increasing its earnings stability and diversification. 

There is also a potential bonus of the partnership with robotic bricklaying business FBR Ltd (ASX: FBR) which could become very useful if it proves successful.

Foolish takeaway

Brickworks is trading at an attractive discount to its underling assets and is building very useful earnings diversification in the US which could one day be the biggest contributor to profit. I’d be happy to buy some shares today.

The post I believe Brickworks’ long-term thinking makes it one of the best ASX200 shares appeared first on Motley Fool Australia.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Brickworks. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2019