I view Brickworks Limited (ASX: BKW) stock as a compelling long-term S&P/ASX 200 Index (ASX: XJO) share investment.
Brickworks is one of the older ASX 200 businesses, having listed several decades ago. The company is best known for being the largest brickmaker in Australia, but it also has a presence in several other areas.
It manufactures stone and masonry, roofing, cement, paving, battens, and specialised building systems. The company is also the leading brickmaker in the northeastern United States.
There are several reasons why I think now is a great time to buy this ASX 200 share and own it forever.
Weakness in the construction sector
The building products sector is typically a cyclical industry, so I believe there are opportunities to invest in this ASX 200 share during periods of weakness.
Brickworks had this to say in a recent presentation to investors: "Conditions in this market are expected to be challenging for the next 12 months as we move through a cyclical low in building activity".
However, after the short-term weakness, Australia "appears to be on the cusp of a significant building boom, with record immigration levels and population growth exacerbating an already chronic housing undersupply issue," according to the company.
With the Brickworks share price down 15% since March 2024, I think this part of the cycle represents a good time to invest.
Commercial property exposure
One of the main things I like about Brickworks is its significant asset base — it's not just a building products manufacturer.
It owns a 50% stake in a real estate trust that owns prime industrial property exposed to structural tailwinds, with a large development pipeline and appealing rental growth profile.
The trust focuses on industrial estates in cities like Sydney and Brisbane, with blue-chip tenants including Amazon, Woolworths Group Ltd (ASX: WOW), Coles Group Ltd (ASX: COL), DHL and Telstra Group Ltd (ASX: TLS).
There are a number of tailwinds for this segment, including the increase in online shopping, which is leading to increased demand for 'last mile' logistics and warehousing. There is also growing demand for sophisticated and higher-value facilities (including robotics and multi-storey).
Those structural trends, along with land supply issues, have driven up rent for prime industrial property in western Sydney by 55% in the last two years, which bodes well for Brickworks' future rental growth as rental contracts come due for renewal.
I think this segment can drive significant value for Brickworks in the coming years.
Strong long-term returns from its investments division
The ASX 200 share owns 26.1% of investment business Washington H. Soul Pattinson and Co. Ltd (ASX: SOL), which owns investments in ASX large cap shares, ASX small-cap shares, private equity, credit and property.
Soul Patts' diversified and defensive portfolio helps provide stability for Brickworks' overall business and is steadily paying a growing dividend to Brickworks.
Brickworks is benefiting from the steady asset growth that Soul Patts is delivering, thanks to the growth of its asset value.
Final thoughts
I think this ASX 200 share is a great one to own for the long term because of the good assets on offer at a compelling value. I'm excited by Brickworks' potential to deliver compounding growth for a long time to come.
