The S&P/ASX 200 Index (ASX: XJO) has risen more than 33% since bottoming out on 23 March this year.
While this has been great for investors already in the market, it also means that ASX shares aren’t as dirt cheap as they were even a few weeks ago. That makes finding bargains just that little bit harder.
But luckily, I think there are still good deals out there. As the investing legend, Peter Lynch, once said, the more rocks you look under, the more investment opportunities you will find. So here’s a rock I’ve been looking under today.
Enter Brickworks Limited (ASX: BKW)
Brickworks is an ASX blue chip share that has a robust presence in the construction and building materials industry (as the name suggests). It’s one of the oldest companies on the ASX, having started life way back in 1934.
Building materials is a highly cyclical industry that tends to boom during good economic times and contract when times aren’t so good. Right now, we happen to be in the latter stage of the economic cycle for obvious reasons.
Luckily, Brickworks has been here before. It also has two other parts to its business that tend to cushion its cyclical business components. Firstly, it has a portfolio of land assets that it rents out for steady profits. Recently, this has expanded to include a warehousing partnership with the eCommerce giant Amazon.com Inc (NASDAQ: AMZN) and Goodman Group (ASX: GMG). Steady income from these kinds of assets greatly improves the Brickworks business model in my view.
Secondly, it owns a significant chunk of other ASX businesses, most of which is in shares of dividend stalwart, Washington H. Soul Pattinson & Co Ltd (ASX: SOL). Soul Patts is known for its diverse range of investments, which include large stakes in TPG Telecom Ltd (ASX: TPG) and New Hope Corporation Limited (ASX: NHC). This diversifies Brickworks’ earnings even further in my view.
How does the Brickworks share price stack up?
The Brickworks share price is $16.67 at the time of writing, which I think is dirt cheap. Its 39.4% stake in Soul Patts alone is worth approximately $1.88 billion, which is indicative of significant value given the total market capitalisation of Brickworks is $2.46 billion on current prices.
The company also offers a strong dividend, offering a trailing yield of 3.53% (or 5.04% grossed-up with full franking credits) on current prices. Brickworks has also held steady or increased this dividend every year for more than four decades.
My conclusion? Brickworks is a dirt-cheap share today and a worthy addition to any long-term focused ASX share portfolio.
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Motley Fool contributor Sebastian Bowen owns shares of Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of and has recommended Brickworks and Washington H. Soul Pattinson and Company Limited. 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.