Continental Building Products: Strongly Cash-Generative Gypsum Wallboard Manufacturer

Stephen Dodson of Bretton Fund presented his in-depth investment thesis on Continental Building Products (NYSE: CBPX) at Best Ideas 2018.

Continental Building Products is a Virginia-based manufacturer of gypsum wallboard. Housing starts, wallboard, and building products in general are in the middle of a long recovery cycle, with many of years of above-average growth ahead. The wallboard industry has consolidated post-crisis, leaving a handful of competitors per market, and implemented pricing discipline, with much of the industry producing attractive margins and returns on capital. Due to a depreciation-capex mismatch, Continental Building Products produces more free cash flow than net income, and management has been on a pace of retiring 5-6% of shares per year. The company is trading at 13x free cash flow and 11x EBITDA-capex.

About the instructor:

Stephen Dodson founded the Bretton Fund in 2010 and serves as its president and portfolio manager. Prior to founding Bretton, Stephen was with Parnassus Investments, a San Francisco–based investment manager. Stephen was with Parnassus from 2002 to 2008 and served in a number of areas within the firm, including portfolio manager and president. In 2008, Institutional Investor News named him one of the 20 Rising Stars of Mutual Funds. Prior to Parnassus, he worked for the venture capital group of Advent International, a private equity firm, and was an investment banker for Morgan Stanley in New York and Menlo Park. He holds a BS in business administration from the University of California, Berkeley.

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