Trex: What happened to this Building Products darling?
A structural grower is in a cyclical decline and has lost 30pts of multiple. What happened and is it time to jump in?
Welcome to the 48th investment case, 38th resilience idea on Crack the Market (and the most comprehensive Trex investment case you will find online)! Join me as I dissect an ex building materials darling and what used to be one of the most impressive growth stories in the space, riding a decades-long secular wave, and one of the most profitable companies, which has had a meltdown this year and is now hotly debated and 30pts cheaper than 4 years ago.
Twice a week, I will release deep dives into stocks and sectors that fit into the three themes that I see winning in this age of tariffs and deglobalization: resilience, sovereignty & reshoring, China. I will then deep dive into the opportunities in the AI data center value chain.
Take advantage of this once in a generation opportunity to build long term wealth by investing in great stocks that will deliver returns for your portfolio for years to come.
You can already read my first 47 deep dives, all of which I see as winners in this new world of tariffs and deglobalization:
ASML (reshoring & China idea): The most innovative company in the world will 2.5x its EPS by 2030.
LKQ (resilience idea): The most defensive business in the auto industry is a tariff winner and could become a compounder.
Atlas Copco (resilience, reshoring & China idea): The best industrials business in the world is on sale, extremely resilient and will benefit from US reshoring.
Badger Meter (resilience idea): The perfect business in the perfect end market, water meters are the definition of resilience.
Knorr Bremse (resilience idea): Who knew making brakes was this lucrative? Rerating with self help story and upside from German infra plan.
Flex (reshoring idea): The electronics manufacturing giant building Nvidia’s servers and enabling reshoring is becoming a better business.
Itron (resilience & reshoring idea): Riding the grid investment super cycle and enabling smart grids.
Roper (resilience idea): A resilient cashflow compounder in the software space with inflecting growth.
RELX (resilience idea): The company to own forever – one of the very best businesses on Earth.
CPKC (resilience & reshoring idea): The rail connecting Canada/US/Mexico and benefiting from reshoring.
Novo Nordisk (resilience idea): The most exciting pharma company in the world is misunderstood and its growth engine is ready to roar back to life.
Kurita (resilience, reshoring & China idea): Water services expert with improving margins and benefiting from reshoring of semiconductor production.
Halma (resilience idea): High quality compounder in safety, health and environmental technologies.
Quanta Services (resilience & reshoring idea): Countercyclical compounder riding a multi decade infrastructure buildout.
Infineon (China idea): Power semiconductor leader with strong structural drivers (AI power and China auto) amidst a cyclical recovery.
Hubbell (resilience & reshoring idea): Pure play on US electrification demand driven by AI and grid investment cycle.
Iberdrola (resilience & reshoring idea): Best integrated utility in the world with a stellar track record and solid growth driven by networks and renewables
Nvidia (AI & data center idea): The backbone of the AI world is unstoppable.
Veolia (resilience & reshoring idea): Resource management giant (water, waste, energy) due for a rerating.
TJX (resilience idea): The retail giant that keeps winning.
DSM-Firmenich (resilience idea): The diversified ingredient powerhouse benefiting from a transformational deal.
Zoetis (resilience idea): Leader in animal healthcare.
Prysmian (reshoring idea): Global cable leader entering a golden age.
Bentley Systems (resilience & reshoring idea): The software compounder bringing infrastructure into the AI age.
Givaudan (resilience idea): The highest quality and most resilient ingredient compounder has a compelling valuation.
First Solar (reshoring idea): The rising Sun in a new electricity supercycle.
Arcadis (resilience & reshoring idea): An engineering and design consultancy giant poised for a rerating.
Thermo Fisher (resilience & reshoring idea): Life Science tools giant just had its clearing event and is a stealth reshoring winner.
Nexans (reshoring idea): Electrification pure play with visibility into 2030.
Croda (resilience idea): A covid darling with a ridiculous valuation is at an inflection point.
Copart (resilience idea): One of the best businesses on Earth is being sold off, should you jump in?
Schneider Electric (resilience & reshoring idea): The Electrification champion that keeps compounding.
Cadence (resilience idea): A defensive compounder in the semi space & one of the most profitable software businesses in the world is getting better.
SAP (resilience idea): The unstoppable growth engine behind every business.
FICO (resilience idea): The Score Behind the Score.
Siemens (resilience & reshoring idea): The best conglomerate on Earth is sitting on EUR70bn of optionality.
MP Materials (resilience & reshoring idea): The Western rare earth champion.
Sopra Steria (resilience & reshoring idea): This boring IT business is a hidden Defense and Sovereignty play.
Hoffmann Green Cement (reshoring idea): Cementing a green future.
Oracle (resilience idea): The Oracle of the AI Age.
Dassault Systemes (resilience & reshoring): Why are investors overlooking this Software giant?
Eli Lilly (resilience & reshoring): The best pharma company in the world.
Air Liquide (resilience & reshoring): The ultimate defensive earnings compounder.
CATL (China): The battery titan with electrifying growth.
Broadcom (AI data center): The $1.7tn AI underdog
Siemens Energy (reshoring): All gas (& electricity), no brakes.
Shopify (resilience): How One Platform Took Over Modern Retail.
After reading this article, you will understand why this used to be a market darling, what it does, why it dominates composite decking and railing, why its niche is so attractive within the building products space, why the company was such a powerful compounder and what has happened in the last years, and why it may remain a compelling long-term compounder despite recent growth challenges.
In this article I go through:
Trex’s business and how it dominates the composite decking and railing market, a category it invented and continues to lead.
How Trex built a vertically integrated, recycling-driven manufacturing model that delivers durable cost advantages, high margins, and strong barriers to entry.
Why Trex has historically delivered superior growth and profitability through the cycle, and what needs to change for growth to re-accelerate.
How Trex’s cash generation and capital allocation discipline create a long-term compounding engine, with free cash flow set to inflect as recent capex rolls off.
Why Trex’s business model, governance, and category leadership make it a resilient cash machine, even in a difficult housing and repair & remodel environment.
