This ASX share is up 104% and just gave $280m to shareholders

Definitely not in a glamorous industry, but its investors have partied long and hard. And these fund managers reckon there’s more to come.

| More on:
A happy construction worker leap-frogs over another as a third looks on

Image source: Getty Images

It’s that time of the year when professional investors sell off their winners and look for the next bargains.

One ASX share that Wilson Asset Management portfolio managers Matthew Haupt, Catriona Burns and Oscar Oberg are excited about for the new financial year is Fletcher Building Limited (ASX: FBU).

The New Zealand company plays in the not-so-glamorous construction materials supply business. Think along the lines of concrete and flooring.

The Wilson trio revealed that both WAM Capital Limited (ASX: WAM) and WAM Research Limited (ASX: WAX) funds now hold the stock.

“Its share price finished the financial year up 104%,” they wrote in a memo to clients.

“Fletcher Building is in a strong financial position, announcing that it expects earnings before interest and tax (EBIT) for FY2021 to be between $650 million to $665 million — towards the upper end of the previous guidance range.”

Fletcher Building just gave heaps of money back to investors

The excellent numbers gave Fletcher Building enough confidence to reward its shareholders handsomely last month.

“The company began returning capital to shareholders in the form of a NZ$300 million ($280 million) on-market share buyback in June,” read the Wilson memo.

Fletcher chief executive Ross Taylor said in May that “leverage [is] expected to remain below our target range in the medium term”. 

“This position provides us with capacity to recommence capital management and distribute up to NZ$300 million to shareholders.”

Fletcher’s ASX shares were up 0.93% on Friday, to trade at $7.02 in the afternoon.

Future looking bright for Fletcher

The Wilson portfolio managers don’t believe the party has ended with the June buybacks.

Fletcher Building will continue to be a post-COVID recovery winner, they reckon.

“We believe Fletcher Building is well positioned to take advantage of market tailwinds, including a pick-up in construction activity and the low interest rate environment,” their memo read.

“Additionally, the company continues to benefit from federal government stimulus, such as the Home Builder scheme in Australia and infrastructure stimulus in New Zealand.”

Fletcher now has a market capitalisation of $5.74 billion. The company is dual-listed in its country of origin as Fletcher Building Limited (NZE: FBU).

Should you invest $1,000 in Fletcher Building right now?

Before you consider Fletcher Building, you'll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and Fletcher Building wasn't one of them.

The online investing service he’s run for nearly a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

*Returns as of August 16th 2021

Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Materials Shares