How To Play America's Infrastructure Boom...
Turns out our infrastructure problems in Baltimore just keep getting worse.
Yesterday, another water main break occurred right near our DRH headquarters. Water pressure was reduced to a drip on higher floors and our faucets were spewing out delicious brown-colored water.
If this micro-trend is any indication of what’s to come, which I believe is the case, the U.S. is set for infrastructure overhaul. And today we’ll cover a few ways to play it…
If you remember from our discussion yesterday, America’s coming infrastructure boom is a two-part phenomenon.
First is the need to fix ailing infrastructure that’s simply too old. Much like the 1913 water main in Baltimore or the bridge in Minnesota, much of America’s infrastructure has paid its due and now needs to be replaced.
The second part of the story is that we’ll actually have a way to facilitate this infrastructure boom with a bountiful supply of oil and gas. With more domestic energy flowing in the pipes, not only is the private sector enjoying a cost advantage over the rest of the world – but the local/state/federal government is benefiting from oil and gas taxes and fees.
The need for infrastructure AND the means to pay for it, I love it when a plan comes together!
That’s the backstory. Today let’s take a look at three ways to play it.
Fluor Corp. (FLR) is a 100-year veteran in the American infrastructure industry. This multi-billion dollar company is a huge player in the energy and mining sectors along with regular infrastructure and government projects.
The great part about Fluor is its primary focus on the energy sector. So while America’s energy boom continues to grow the demand for gas-fired power plants, ethane separation plants, petro-chemical plants and other energy-related industries will blossom. Fluor is a go-to contractor for these large-scale projects.
Fluor is also a major player when it comes to global infrastructure for the mining industry. You may remember a few write-ups that we’ve posted here about the enormous resource potential of Mongolia. Well, it just so happens that Fluor is the contractor for what could be the world’s largest copper mine, the Oyu Tolgoi copper mine in Mongolia.
Getting back to the point, Fluor also handles major domestic infrastructure projects, including its current work on the San Francisco Bay Bridge. Add it all up and you’ll see that Fluor has a bright future here at home and abroad.
Another company that should be on your radar is Mueller Water Products Inc (MWA.)
Mueller is a direct play on domestic water infrastructure – in fact, the company is the leading North American provider of water infrastructure, flow control products and services.
By the looks of their share price year to date, things are booming! Mueller is up over 104% since January. Although the company has shown a substantial run-up, its current price is still 70% below its 2007 highs. So there’s still plenty of room for growth, as the infrastructure biz picks up.
A third way to play the coming infrastructure boom focuses less on regular infrastructure and more on what we’ll call “energy infrastructure.”
After all, America’s infrastructure overhaul isn’t going to emerge without “cheap” energy. Without oil and gas flowing plentifully through our pipes we’d be hard-pressed to find the resources to establish the 2013 version of the New Deal.
But with cheap energy, say $80 oil and $3 natural gas, there will be plenty of wealth floating around the country. Tax revenue from oil and gas operations will fill the coffers and fuel some loose-money infrastructure projects.
This money flow will also fill the pockets of private companies – specifically ones that control the energy infrastructure.
A great way to play energy infrastructure in one fell swoop is through the SPDR Macquarie Global Infrastructure 100 ETF (GII). Out of all the major energy/infrastructure plays this ETF offers a solid list of holdings all in one easy to own share.
As I type, holdings include large utilities (Duke Energy, Southern Co and Dominion) along with pipeline and infrastructure plays like National Grid, Transcanada and Enbridge. It’s a one stop shop for the best energy-infrastructure plays – plus, it gives you a solid 4% dividend.
Looking ahead, our country’s infrastructure needs more than just a band-aid.
Today, with revenue bursting from America’s energy patch, we’re sure to see nothing shy of an infrastructure overhaul.
America’s infrastructure boom is coming, now’s the time to buy in.
Keep your boots muddy,
Original article posted on Daily Resource Hunter