In this clip from THE PITCH, we give you an inside look at how a research analyst's high-conviction stock idea becomes a manager's winning position.
Watch below as Industrials analyst Jay Van Sciver pitches Hedgeye CEO Keith McCullough on Armstrong World Industries (AWI), Van Sciver's new 'Best Idea' Long position.
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Jay Van Sciver: "We are going to talk about Armstrong World Industries (AWI), which is a maker of ceiling tiles. You think about the standard product being the drop ceiling white tile, and that’s a great business because when one of them gets dirty, scuffed, or a pencil through it, you replace it with the exact same tile at a very high margin.
I think this is a company that got baked in with the mix of businesses hurt by work from home fears and pandemic recovery concerns have been a big headwind for the stock. I think a far bigger impending catalyst is in fact infrastructure.
The reality is that infrastructure is coming. It is going to be passed pretty much independent of bipartisan support or not, and it brings a lot of money to schools, transportation facilities, airports, healthcare facilities, and federal buildings.
This is similar to what happened under the AARA under Obama when Biden was Vice President, and it did drive a lot of building products demand. That was a little more towards energy efficiency like HVAC systems, but this is a sizable and will bring $100 millions of dollars of spending to a market that really needs the investment.
People always talk about infrastructure being old and underinvested. I think that’s true and the pandemic is going to result in a lot of new codes and higher probability of ending the trend of less space per worker. You will certainly see some of the prior trends reverse, and you’ll have some very innovative products included in ceilings for ventilation, sterilization, and things like that.
This is the kind of company that at its size and with its kind of market opportunity with a multi-year expanding market, that it could be a multi-bagger.
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