Buy-to-let? I think these 2 stocks will beat it in 2019

The buy-to-let business looks like it’s facing some serious headwinds, as my Motley Fool colleague Royston Wild has explained. And having had a rental property myself for many years, it’s not an investment I’d get into these days.

But the property business is profitable, so what alternatives are there for investing in it? Buying shares in house-builders is one way, though they have fallen out of favour at the moment. I think that’s irrational, and I also see bargains across the construction sector right now.

Global growth

I’m liking the look of what I see as a combination of growth-plus-dividends from CRH(LSE: CRH), which released an upbeat third-quarter update on Tuesday. The global building materials group says its EBITDA for the nine months to 30 September came in at €2.5bn, “despite adverse weather conditions in certain markets.”

Some of that comes from acquisitions, but like-for-like EBITDA was 2% ahead, and was largely thanks to positive momentum in Europe, plus improving demand in Asia. So we’re looking at an international business here, which should help offset any construction weakness in the UK. EBITDA for the full year is expected to reach approximately €3.35bn.

Forecasts suggest an 11% drop in EPS for the year, mind, but a return to growth with +16% is indicated for 2019. That puts the shares on a P/E multiple of 13 for 2018, dropping to 11 for 2019. I see that as good value, especially for a company talking of an “aggressive growth plan.” The progressive dividend adds to the attraction, even if it’s only yielding around 3% right now.

CRH clearly sees its shares as too cheap too, and has just launched phase three of its buyback programme, which has already seen €700m returned to shareholders. And there’s another €100m to come.

In-demand technology

Accsys Technologies(LSE: AXS) is an intriguing proposition, bringing new technology to the construction materials business. The company, which is working on the the acetylation of wood to produce a more durable material, has seen its shares climb 35% so far in 2018.

First-half results show a revenue increase of 12% over the same period a year ago, with an 8% rise in sales of its key Accoya product. The latter was “significantly restricted by continued capacity constraints,” but the company now has its third Accoya reactor operational, so that bottleneck should begin to ease. And it surely says something good about the material if demand is outstripping the firm’s current supply capacity.

It’s hard putting a valuation on Accsys shares right now, as the company is not in profit, and forecasts suggest at least a couple more years of losses (albeit significantly declining ones).

Debt has built up to €34.2m, and the firm’s cash balance dropped from €46.9m a year previously, to €22m. But it’s been a period of serious capital investment in land and plant, and Accsys did say its “operating activities generated positive cash-flow during the period.”

With annual pre-tax losses of around €5.65m, and €2.96m predicted for this year and next, Accsys looks to be in reasonable liquidity shape.

It’s early days, and this is a technology company in its pre-profit phase, but it does look like it’s a pretty well-proven technology now. I think we could be at an important turning point for Accsys.

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Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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