If I do my job right, every now and then I should stumble upon a profitable correlation in the resource space.
Today, I want to share with you my latest catch.
In particular, the airing of Obama’s public laundry, also known as the State of the Union Address, unveiled one market sector poised to boom. Indeed, as the government spends, this sector will win!
“America’s energy sector is just one part of an aging infrastructure badly in need of repair” president Obama was able to mutter through the incessant clapping during his recent State of the Union speech.
“So tonight” he later concluded “I propose a ‘Fix-It-First’ program to put people to work as soon as possible on our most urgent repairs, like the nearly 70,000 structurally deficient bridges across the country.”
Your humble editor didn’t lace up his boots to check out the bridge problem across the country, but recently I have seen the need for a country-wide infrastructural overhaul. And checking the math, just on the letter of Obama’s speech, “70,000” bridge-fixes won’t come cheap.
Luckily we don’t need to bicker whether the government spending in the infrastructure sector will be warranted or not – after all, we’re not here for politics, we’re here for profits!
There’s no doubt that some areas in our nation’s infrastructure have past their prime, many bridges and water pipes for instance. Not to mention loads of up-and-coming infrastructure trends – shale logistics, renewable energy, smart-grid, cheap natural gas utilization, etc – should fuel a further round of infrastructure spending.
In our original write-up in November we covered three different ways to play an American infrastructure boom – Fluor Corp (FLR), Mueller Water Products (MWA) and the SPDR FTSE/Macquarie Global Infrastructure ETF (GII). All three companies, since our initial write-up, are in positive territory. Today let’s cover the star of the bunch, Fluor Corp.
Fluor is up nearly 25% in the past three months. With budding infrastructure plays across the globe, this company has followed the market updraft higher (more than doubling the S&P’s move.)
Fluor’s construction projects run the gamut. The company has its share of U.S. government and local projects with bridges, beltways, FEMA work and Department of Energy projects.
But looking on a broader scale the company is a big player in the global market, including power plant construction, offshore oil production facilities, mining complexes, processing facilities and chemical plants. Yeah, you guessed it, these are the very projects that are starting to sprout here in the U.S. and in other emerging markets.
All said, with more money headed towards finding the world’s coveted natural resources a company like Fluor, can flourish. If China needs offshore oil, Mongolia need copper, Australia needs iron, South Africa needs synthetic fuels, And the U.S. needs manufacturing and chemical plants, Fluor has been the ticket.
After all, the projects I just outlined are all past/present works for Fluor (including work on Mongolia’s world class, Oyu Tolgoi copper mine (shown above.)
So, in an effort to diversify some of our resource holdings – with out of control spending from big gold miners and unpredictable prices for oil and gas – Fluor offers another way to play the world’s resource boom.
Indeed, just yesterday Barrick Gold, the world’s largest gold mining company, announced a new gold mining project on the border of Argentina and Chile. Indeed, this gold mine could be a great addition to Barrick’s resource potential. But while that’s yet to be determined, I know what isn’t! Fluor was awarded the construction contract for this new development. So while the world craves more gold (and other metals), Fluor is enjoying a bevy of miners knocking on its door.
According to Fluor representative Rick Koumouris, “large, remote, complex” projects are emblematic of what the company excels at. So when it comes to frontier market mining projects or offshore energy developments, Fluor is a top-tier choice.
The company should also be a top tier choice for your resource portfolio. Year over year Fluor is just about even, but since our initial infrastructure talk in November prices have shot out of the gate, up 24% — a move that could continue in 2013.
Whether it’s infrastructure projects here at home (pertaining to Obama’s portended spending plans) or remote resource plays in emerging markets, Fluor is a solid, blue-chip way to play it.
Keep your boots muddy,
Original article posted on Daily Resource Hunter
The Managing Editor of the Daily Resource Hunter, Matt is the Agora Financial in-house specialist on commodities and natural resources. He holds a degree from the University of Maryland with a double major in Business and Environmental Economics. Although always familiar with the financial markets, his main area of expertise stems from his background in the Agricultural and Natural Resources (AGNR) department. Over the past years he's stayed well ahead of the curve with forward thinking ideas in both resource stocks and hard commodities. Insley's commentary has been featured by MarketWatch.
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