Global Infrastructureby alphadawgg on May 29th, 2008 at 1:19 am |
Infrastructure is key to economic growth and development. Currently, developed nations are faced with deteriorating roads, bridges and ports. Emerging economies have a big need to build and develop transportation, communications and energy / power networks in order to compete.
The price tag for all this has been estimated at over $40 trillion, according to industry sources and the U.S. Dept of Transportation.
Catalysts for infrastructure spending include:
1.) Urbanization of developing countries
2.) Population growth
3.) Privatization of infrastructure financing and management
4.) Government mandates
5.) Public opinion
Infrastructure assets provide the groundwork for economic growth and modernization. Categories of infrastructure include transportation (toll roads, shipping ports, airports); energy (pipelines, equipment, services, storage, transportation, alternative power-solar, wind, etc.); utilities (electric, gas, water) and communications (wireless, broadcast and cable, satellite systems).
Companies involved in these areas will see their stock prices rise significantly for the rest of this decade and into the next. In other words, this is an area where you want to play and invest—for a long time.
We will also see institutional money like pensions, endowments, foundations, mutual funds, sovereign investment funds, etc., continue to pour money into these kinds of stocks. Why?
Because infrastructure companies have several attractive investment characteristics:
1.) Long-lived assets and stable cash flow
2.) High barriers to entry and significant capital requirements
3.) Monopolistic structure due to government regulation and limited competition
4.) Inelastic demand — essential services that are resistant to economic downturns
These factors have the potential to generate stable growth and income for years. (Exactly what Baby Boomers in this country are needing, by the way.)
Investing in global infrastructure is a pure play on a country’s or region’s economic growth. It’s also a good way to diversify globally. In addition, according to Zephyr Associates, global infrastructure stocks are not closely correlated to global stocks or global bonds. For the past five years ended 2007, global infrastructure stocks were only 73% correlated to global stocks and 51% correlated to global bonds. So, they could be considered a sub-asset class.
Infrastructure is a major long term investment theme.
Some ideas here include (MIC: 3.88 -6.28%), (VE: 23.75 -2.90%), (EXC: 51.06 +0.97%), (CIG: 16.00 +1.59%), (SKM: 17.28 +0.93%), (CHT: 16.06 +2.16%). There are many others. If you have any that come to mind or that you currently have positions in, post them here. I’d like to compile a watchlist to follow, update and share with all of you.
Disclaimer: This information is not intended to be used as the primary basis of investment decisions. Because of individual investors requirements, it should not be construed as advice designed to meet the particular investment needs of any investor. Consult your financial advisor prior to taking any actions. The information and opinions contained here are those of the author and are not necessarily the same as those of iBankCoin, its principals or its affiliates. The author may have a position in one or more stocks mentioned here. Trade at your own risk.
Nice ideas. thx
May 29th, 2008 at 6:42 amWe win.
BIG up huge!
May 29th, 2008 at 9:16 amNice post…
May 29th, 2008 at 9:29 amI think other than government mandates, the results of solid infrastructure helps generate wealth because it keeps the flow of money moving quickly. No country can grow if there are people (or governments) sitting on large amounts of cash, and there is no real movement and exchange of goods.
Basically for a single country like the US economy to be successful, you need more money and goods and production coming in than going out without destroying future ability to keep it going.
But as a global economy, the only way we can all benefit and accumulate wealth is if money is being moved around very quickly. Production continues with this flow of money, and pople get more and more goods, and the production means more and more jobs, and the jobs mean more money flowing, and more money flowing is going to continue this wealth. That’s why taxes kill economies. The government has to issue the taxes through the federal reserve through the IRS. That money has to be counted, regulated, sent back to the IRS, then to the federal reserve, and then out to the government. The government sits on it, and all of this time, no new products or materials have been produced, and the money lies there dead, as does the wealth.
Unfortunately, when you want wealth staying in your country and you have more imports than exports, slowing that process down, is better for that country in some ways, otherwize you have wealth flowing OUT of the country quickly.
Alphadawg - what do you think of CBI and Cemex (I think the ADR’s trade under CX). I don’t own either one, but I have traded CBI in the past.
May 29th, 2008 at 10:31 amCajun, we win indeed. Their strategy of increasing sales productivity and lowering cost structures at the same time is apparently working.
Juice, if you want to contribute ideas in this space, I’m all ears.
lol, good comments!
boca, I like CBI. If you’re a value investor, you might want to buy it here.
Resistance is at 46. Momentum buyers might hold off until signs of better strength.
I like the whole engineering, heavy construction space. Basically the “brains” of the infrastructure play. Others include KBR, TTEK, JEC and MDR.
JEC and MDR have pulled back and will present a buying opportunity at some point. I’d hold off on them for now, but keep them on the radar. I have a position in MDR and TTEK. Will probably look at buying KBR here.
CX is a good play on the infrastructure theme as well. It has recently pulled back pretty sharply. There’s good support at 27, so would possiblly look at it there.
May 29th, 2008 at 10:50 amVery nice call and premise.
May 29th, 2008 at 10:51 amOne other driver for infrastructure that is rather obvious: everyone on the planet is all for economic growth and a better standard of living. You can’t have that unless the basic framework is in place.
May 29th, 2008 at 11:04 amboca-
all IMO, and i am admittedly an extremely risk averse cheap bastard:
CBI is godhead; been in business for 10,000 years, and they have a $7 Billion backlog. i am waiting for the markets to implode, so i can scale in at 40 and 38. at a minimum, it has to close that gap @ 41, so maybe i will nibble there.
careful with CX; huge debt, no china exposure, selling assets to firm up the capital structure (which is a good thing), and extended from its lows. i am a buyer @ $25…..though, its 50 is crossing the 200, so being a cheap bastard means i may miss out.
May 29th, 2008 at 11:05 amI forgot: how about CBI… Ragin’ & Boca have got the answers.
May 29th, 2008 at 11:13 amnull–thanks for the comments.
May 29th, 2008 at 11:20 amGreat thread - thanks for all the comments and info on CBI and CX.
May 29th, 2008 at 11:52 amI too own CBI
May 29th, 2008 at 12:23 pmDon’t forget about the Ozzie fuggers of MIC.
They own.
May 29th, 2008 at 5:03 pmOzzie fuggers already noted.
Also found BIP. A 5% div. payer; Into hyrdo electric power, Canada, Brazil and Chile.
40% owned by BAM
May 29th, 2008 at 5:10 pm