Building materials set to outperform

Building materials set to outperform. The Building Materials sector will benefit from lower interest rates and is set to outperform in CY15. Having de-rated materially in CY14 these stocks are now relatively inexpensive and offer some of the best value organic growth in the market. Sentiment for the sector deteriorated this year as lead indicators started to peak. Traditionally selling the sector when this occurs has been the right thing to do. However, unlike previous cycles, activity levels are likely to remain robust and sustainable at elevated levels for an extended period. Whilst further interest rate cuts are unlikely to increase activity levels materially, rate cuts should improve sentiment to the sector and see these stocks re-rate back to the earnings multiples they enjoyed in early 2014. Fletcher Building is a good example of this. @dallingham