If you've been avoiding building-materials stocks so far, it's time to rethink. Whether President Trump's ambitious plans to spend $1 trillion to rebuild America's infrastructure will come to fruition is anyone's guess, but the building-materials industry looks headed for an upturn, going by the recent rise in housing starts, building permits, and construction spending in the United States.

For investors, this is an opportune time to consider stocks of companies that manufacture and supply materials used in housing, construction, and infrastructure. Think aggregates, concrete, cement, bricks, and glass, or building products like roofing and fixtures that are used for repairs.

Building materials is a highly fragmented industry, though, with several manufacturers fighting it out to gain market share. Here are some of the largest building-materials stocks today:

Building Materials Company Area of Specialization Market Capitalization
Vulcan Materials Company  Aggregates $16.25 billion
Martin Marietta Materials (NYSE:MLM) Aggregates  $13.02 billion
Masco Corp. (NYSE:MAS) Plumbing, hardware $12.56 billion
Cemex SAB de CV  Cement, aggregates $11.49 billion
Owens Corning (NYSE:OC) Composites, roofing $9.71 billion
MDU Resources Group Inc.  Aggregates,
construction services
$5.25 billion
USG Corporation Gypsum, roofing $4.85 billion
Louisiana-Pacific Corporation  Engineered wood, siding $3.91 billion
Summit Materials Inc. Aggregates, cement $3.34 billion
Builders FirstSource Inc. Roofing, wall panels $2.2 billion
U.S. Concrete Inc.  Concrete, aggregates $1.19 billion

Data source: Yahoo Finance. Data as of Nov. 22, 2017.

However, only a handful of stocks with strong competitive advantages will stand out as the housing and construction markets gather steam. 

A bricklayer installing bricks on a construction site.

Some building materials stocks could fortify your portfolio returns. Image source: Getty Images.

This stock is growing at a torrid pace

Martin Marietta, one of the leading manufacturers of aggregates, concrete, and asphalt, with a presence in 26 states, is firing on all cylinders. Martin ended 2016 with record sales and earnings and is on track for another solid year.

Martin's strength lies in its geographic footprint: It has a solid presence in some of the fastest-growing construction markets in the U.S., including Texas, North Carolina, South Carolina, Georgia, Texas, Colorado, and Florida. Its footprint in the Southeast should further strengthen once it completes the acquisition of privately held aggregates company Bluegrass Materials in coming weeks for $1.63 billion.

Charts showing Martin Marietta's sales, gross profit, and EBITDA growth between 2012 and 2017 expected.

Image source: Martin Marietta.

Martin faces stiff competition from Vulcan Materials, thanks to a similar product portfolio and common end markets. However, Martin scores a point over Vulcan for its stronger record of operating margins, free cash flow, and return on equity.

For fiscal 2017, Martin expects to grow its revenue and earnings by low-single-digit percentages at the midpoint. That may sound uninspiring, but the building-materials company would've fared better if not for this season's hurricanes. In any case, even small growth in its bottom line will mean a record year for Martin, which is commendable in an otherwise challenging year. With management also aiming to return 25%-30% of its earnings in dividends, investors in Martin Marietta could end up with meaningful gains in the future.

It's hard to ignore this stock once you know the facts

Owens Corning has come a long way since it was founded in 1938, expanding its footprint to 33 countries through its three business segments: composites (fiberglass), insulation, and roofing. The company generated $5.7 billion in sales in 2016.

Owens' balanced end-market composition makes for a compelling investment thesis.

Pie charts showing Owens Corning's revenue by end market.

Owens Corning's diverse portfolio gives it an edge in the building materials industry. Image source: Owens Corning.

So while a strong housing market should boost Owens' roofing shingle sales, its insulation business should benefit from both residential and non-residential construction, especially as the need for energy efficiency grows. Owens' composites segment, meanwhile, serves diverse industries aside from building and construction, including transportation, industrials, power, energy, electronics, and consumer goods.

Owens is on an acquisition spree. Among the several deals it made last year, one that stood out was that of Pittsburgh Corning, one of the world's leading manufacturers of cellular glass insulation, in a deal worth $560 million. With this acquisition, Owens' footprint in the commercial and industrial markets, especially in Europe and Asia, should grow substantially. Owens has also struck a deal to acquire European mineral-wool insulation manufacturer Paroc Group for900 million euros by early 2018, and it expects the deal to be immediately accretive to earnings.

In the past five years, Owens has grown its net income sevenfold and free cash flow more than tenfold. As incredible as those statistics are, a manageable debt-to-equity ratio of 62 also gives the building-materials manufacturer wiggle room to tap debt to fund growth projects. Long story short, I'm hugely impressed with the way Owens is growing and believe it's a fantastic stock to consider if you're interested in the building-materials industry.

Here's an offbeat stock to bet on the industry

You'd hardly think about home improvement and repair products such as paints, plumbing, and doors when you're thinking about materials used in construction. However, buildings would be incomplete without these products, which is why Masco is such an intriguing play for investors looking at the building-materials industry.

Masco has been around since 1929 and has grown from a company with sales of less than $1 million to over $7 billion over the decades. Today, the company's portfolio includes household brands such as Behr, Delta Faucet, Hansgrohe, Kraftmaid, and Milgard, and its customer list boasts leading homebuilders such as PulteGroup and Lennar.

Plumbing products form the bulk of Masco's sales -- almost 48% in 2016 -- and make up the company's largest profit center today. That's not surprising given the high-margin nature of the repairs and remodeling business. It's simple logic: Faucets and showers can break down anytime and need to be fixed or replaced quickly, which ensures a steady demand for Masco's products. The company has an impressive outlook for each of its four segments for 2019.

Segment 2019 Sales Growth Outlook 2019 Operating Margin Outlook
Plumbing products 4%-6% 18%-19.5%
Decorative architectural products 4%6% 18%-20%
Cabinetry products 5%-7% 13%-15%
Windows and other specialty products 3%-5% 10%-13%

Data source: Masco.

Between 2016 and 2019, Masco aims to grow its operating income at a compounded rate of 8% and earnings per share at a rate of 18%. If that isn't impressive enough, Masco also stands out for its financial fortitude. Barring 2014, Masco consistently generated higher free cash flow than net income in the past five years and currently holds more than $1 billion in cash and equivalents.

No matter which way you look at it, Masco is as solidly placed to benefit from any uptick in global construction activity as Martin Marietta and Owens Corning. Whether you want to invest in aggregates, cement, roofing, or home improvement is your call, but each of these building-materials stocks is poised to climb as residential and non-residential construction spending rises.