Pssst … Gravel!

A tip from John Fox of the FAM (Fenimore Asset Management) Value Fund: Buy rocks. A good chunk (6%) of his fund's $470 million portfolio is in companies that sell gravel, the main ingredient in concrete and asphalt. In a sense FAM Value, comanaged by Fox with veteran Thomas Putnam, and sister FAM Equity-Income (Putnam and Paul Hogan) can be thankful they were not heavier into rocks until recently. The fund men expect that an improving economy will invigorate construction spending, which since 1980 has averaged an annual growth rate of 5%, and will revive profits for quarry-owning companies, specifically in Florida. In fact, among publicly traded companies Florida Rock has the industry's highest EBIT margin (earnings before interest and taxes, divided by sales), 14.5% versus an average of 9.8%.