Knife River: A Concrete Observation

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The curious case of Knife River (KNF +0.51%), a name that conjures images of flinty landscapes and, more prosaically, crushed stone, has recently attracted the discerning gaze of Paradice Investment Management. They’ve deposited a rather substantial sum – $22.00 million, to be precise, accumulated from the quarter’s yield – into this particular quarry, acquiring 312,743 shares. A transaction, one might observe, that suggests a preference for the tangible over the ephemeral.

A Peculiar Acquisition

The SEC filing, dated January 28th – a date already fading into the palimpsest of financial history – reveals Paradice’s newfound affection for aggregates, asphalt, and the contracting services that bind them. This isn’t merely a purchase; it’s an assertion. A calculated wager on the enduring need for foundations, for the very stuff upon which civilization rests. One imagines Mr. Paradice, a man of presumably impeccable taste, surveying the company’s operations with a faintly amused detachment, as if observing a particularly well-constructed ant colony.

The Weight of Proportion

This acquisition, amounting to 4.28% of Paradice’s 13F reportable assets, isn’t a splash, but a considered accretion. A subtle weighting of the portfolio towards the reliably mundane. Compared to their other holdings – GMED, TNDM, NVST, LEA, and FLS – each with its own particular brand of speculative allure – Knife River appears almost… virtuous. A solid, unglamorous counterpoint to the more flamboyant players.

  • NYSE:GMED: $46.10 million (9.0% of AUM)
  • NASDAQ:TNDM: $45.67 million (8.9% of AUM)
  • NYSE:NVST: $37.11 million (7.2% of AUM)
  • NYSE:LEA: $36.86 million (7.2% of AUM)
  • NYSE:FLS: $35.84 million (7.0% of AUM)

As of January 27th, the market valued Knife River at $68.59 per share, a figure diminished by a 31.4% decline over the past year. A precipitous fall, certainly, but one that, for a discerning investor, might present an opportunity. The S&P 500, meanwhile, has danced to a different tune, leaving Knife River trailing by a rather substantial 47.46 percentage points. A clear indication that the market, in its collective wisdom (or lack thereof), has overlooked something.

Anatomy of a Constructor

Let us dissect this enterprise. Knife River, it seems, is in the business of providing the very building blocks of progress. Aggregates, asphalt, ready-mix concrete – the prosaic materials that underpin our infrastructure. They extract, process, and sell these substances, and also offer contracting services for heavy-civil construction projects. Their clientele? Primarily governments – federal, state, and municipal – those insatiable consumers of concrete and asphalt. A reliable customer base, one might observe, particularly in an era of escalating infrastructure deficits.

Metric Value
Revenue (TTM) $3.05 billion
Net income (TTM) $148.32 million
Market capitalization $3.91 billion
Price (as of January 27) $68.59

Knife River is, in essence, a vertically integrated provider of construction materials and services. They control the supply chain, from the quarry to the finished pavement. This allows them to serve large-scale infrastructure projects with efficiency and scale. A solid business model, one might say, built on a foundation of… well, foundations.

The Logic of the Transaction

This acquisition isn’t merely a matter of numbers; it’s a statement about Paradice’s investment philosophy. A clear rotation towards assets with demonstrable demand and pricing power, away from the uncertainties of longer-cycle industrial ventures. They’ve exited one industrial holding (Chart Industries), and redeployed the capital into a business where earnings are driven by backlog, public funding, and recent acquisitions. A shrewd move, one might observe, particularly in an era of fiscal stimulus.

The latest quarterly results support this thesis. Revenue rose 9% year over year to $1.2 billion, while adjusted EBITDA climbed 11% to $272.8 million. Most notably, the backlog reached a record $995 million, up 32% from a year earlier. 87% of this backlog is tied to public work, and more than three-quarters is expected to convert to revenue within 12 months. A comforting prospect, one might say, for a long-term investor.

The company continues to invest aggressively, spending $528 million on acquisitions in the first nine months of the year. Yet, they maintain net leverage around 2.6 times adjusted EBITDA and target further improvement. A prudent approach, one might observe, balancing growth with financial discipline.

Compared to Paradice’s other holdings, this position adds exposure to infrastructure spending with near-term cash flow support. A solid addition to the portfolio, one might say, built on a foundation of… well, you get the idea.

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2026-01-29 14:34