Eagle Materials (EXP) Fell on Sector Concerns

L1 Capital, an investment management firm, released its “L1 Capital International Fund” (unhedged) second quarter 2025 investor letter. A copy of the letter can be downloaded here. The fund returned 4.5% (net of fees) in the June quarter compared to the MSCI World Net Total Return Index’s (in AUD) 6.0% return. The Fund returned 22.1% (net of fees) for the year ended June 30, 2025, compared to 18.5% for the benchmark. During the quarter, the Information Technology and Communication Services sectors outperformed others, driven by the Magnificent 7. Please check the fund’s top five holdings to know its best picks in 2025.

In its second quarter 2025 investor letter, L1 Capital International Fund highlighted stocks such as Eagle Materials Inc. (NYSE:EXP). Eagle Materials Inc. (NYSE:EXP) is a heavy construction material and light building materials supplier. The one-month return of Eagle Materials Inc. (NYSE:EXP) was 8.35%, and its shares lost 7.85% of their value over the last 52 weeks. On July 16, 2025, Eagle Materials Inc. (NYSE:EXP) stock closed at $211.87 per share, with a market capitalization of $6.914 billion.

L1 Capital International Fund stated the following regarding Eagle Materials Inc. (NYSE:EXP) in its second quarter 2025 investor letter:

"On the negative side, 3 companies, Eagle Materials Inc. (NYSE:EXP), Marsh & McLennan and UnitedHealth Group (in alphabetical order) each detracted more than 0.5% from the Fund’s returns for the quarter.

There were no company-specific issues associated with Eagle Materials, but rather the company’s share price was impacted by sector concerns regarding a broad softening in U.S. new residential construction conditions. As illustrated in Figure 10, there has been a relatively modest pull back in new residential construction activity, with greater pressure on multi-family construction compared to single family housing.

Housing is a highly cyclical industry. The recent pullback is nothing like the industry correction following excessive construction in 2005 and 2006. While there are regional pockets of excess inventory, in general it is universally accepted that there is a shortage of housing in the U.S. following an extended period of under-building post the Global Financial Crisis. Prior to the recent correction, we assessed market conditions as broadly mid-cycle. As illustrated in Figure 11, while housing affordability is low, it has not worsened over recent months. Mortgage rates and house prices have both been relatively stable. In our view, the recent downturn in housing activity reflects caution by prospective buyers as a result of the recent macroeconomic and tariff uncertainties, lower consumer confidence and an expectation that mortgage rates will stay higher for longer, reducing the potential to refinance mortgages at a lower rate in the nearish term…” (Click here to read the full text)

Eagle Materials Inc. (NYSE:EXP) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 30 hedge fund portfolios held Eagle Materials Inc. (NYSE:EXP) at the end of the first quarter, which was 36 in the previous quarter. In the fiscal fourth quarter of 2025, Eagle Materials Inc.'s (NYSE:EXP) revenue was down 1% to $470 million, primarily due to lower cement and gypsum wallboard sales volumes. While we acknowledge the potential of EXP as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

In another article, we covered Eagle Materials Inc. (NYSE:EXP) and shared L1 Capital International Fund's views on the company in the previous quarter. In addition, please check out our hedge fund investor letters Q2 2025 page for more investor letters from hedge funds and other leading investors.

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Disclosure: None. This article is originally published at Insider Monkey.