Analysis: Josh Brown Highlights Materials Sector for Late-Cycle Rally

This analysis is based on the CNBC report [1] from January 13, 2026, where Josh Brown outlined his bullish case for the Materials sector. While the broader market focuses on technology and financials, Brown argues that market dynamics are shifting toward a “late-cycle” phase where materials and commodities typically outperform.

Brown identifies three primary catalysts driving this sector rotation [1]:

1. Housing Market Revival:
   With mortgage rates falling below 6% for the first time in five years, demand for residential construction materials is expected to surge.
2. Homebuilder Strength:
   Recent price action in homebuilder stocks (top 0.1% performance historically) signals confidence in future construction volume.
3. Commodity Outperformance:
   Commodities are currently outperforming bonds at the most significant rate since 2008, suggesting a broader inflationary or growth-driven tailwind.

Despite the positive media coverage, real-time market data [0] shows immediate headwinds. The Basic Materials sector underperformed today (-0.55%), with CRH Plc seeing a notable decline of over 3.5%. Furthermore, all three highlighted stocks are trading near 52-week highs with P/E ratios (25x–36x) that exceed historical sector averages, indicating that much of the optimism may already be priced in.

• Catalyst:
  Brown notes the stock has cleared key resistance at $665 with favorable momentum [1].
• Fundamental Friction:
  Recent data [0] reveals a cautionary divergence between price and performance; Q3 2025 earnings showed an 11% miss on both EPS and revenue. The stock trades at a premium 34.5x P/E, demanding flawless execution ahead to justify the valuation.

• Catalyst:
  Viewed as a value play with a lower P/E (25.3x) relative to peers and rising technical support trends [1].
• Immediate Action:
  The stock dropped 3.53% today [0], testing the thesis immediately. Brown identifies $105 as a critical exit level if the intermediate trend breaks [1].

• Catalyst:
  The largest U.S. producer of aggregates, benefiting from local pricing power. Brown sees its chart mirroring MLM’s uptrend but notes it has historically lagged MLM in performance over multi-year windows [1].
• Valuation:
  Trading at the highest multiple of the group (36.35x P/E) [0], making it arguably the most expensive bet on infrastructure growth.

• Late-Cycle Indicator:
  The shift of attention to Materials often signals the mature phase of a business cycle. If history repeats, this sector rotation could provide a hedge against potential weakness in early-cycle leaders like Tech or Financials.
• Infrastructure vs. Residential:
  While Brown emphasizes the housing (residential) catalyst, these companies are heavily exposed to public infrastructure. The convergence of lower mortgage rates (private demand) and ongoing government infrastructure spending (public demand) creates a dual-tailwind unique to this cycle.

• Technical Breakouts:
  MLM trading above $665 validates a breakout setup. If it holds this level, technical buyers may fuel a run toward $700+.
• Sector Rotation:
  If the broader market rotates out of Tech, Materials remains an under-owned sector that could capture capital inflows.

• Valuation Compression:
  Investors should be aware of the elevated valuations [0]. A P/E of 36x for a cyclical construction company (VMC) leaves little margin for error if growth slows.
• Rate Reversal:
  The entire thesis is predicated on mortgage rates staying low. A rebound in inflation or bond yields could swiftly invalidate the housing recovery narrative.
• Execution Risk:
  As seen with MLM’s recent earnings miss [0], operational challenges remain. The next earnings window (Feb 2026) is a critical risk event.

Ticker	Company	Price (approx.)	P/E Ratio	52-Week Range	Analyst Consensus
MLM	Martin Marietta	$658.90	33.9x	Near High	Moderate Buy
CRH	CRH Plc	$126.75	25.3x	Near High	Strong Buy
VMC	Vulcan Materials	$308.28	36.4x	Near High	Hold/Buy

Data Sources: Internal Analytical Database [0]