How Do I Invest in Infrastructure Stocks?

The Changing Tide of Infrastructure

As "fixed" as infrastructure seems, there are changes afoot with the infrastructure names mentioned so far. It seems as though any time we turn on the TV we hear about standards changing or bridges and roads needing to be replaced. (It's something I've personally witnessed quite a bit of recently, as has everyone in the Baltimore-Washington corridor, where they seem to be redoing every road in the tri-state). A lot of infrastructure needs to be replaced now.

As American roads, bridges, and tunnels approach the ends of their expected lives and emerging markets like China require new structures and systems built from scratch, companies like those engineers, contractors, and equipment manufacturers are finding that their business is in high demand.

But infrastructure operators like Macquarie are looking toward a new and different source of income: the privatization of roads, highways, bridges, and the like. Governmental organizations are realizing that one of the best ways to complete a public works project is to lease it to the private sector. Not only can this free up a lot of money to be used elsewhere, it also often results in better-managed toll roads and bridges. According to Holloway's article, this is just what Chicago did with its Skyway Toll Road this summer. Pennsylvania is considering something similar for the Pennsylvania Turnpike. Privatization has become a new means of creative financing for public-use infrastructure.

How to Invest in Infrastructure

There are a few places to turn to if you're interested in investing in infrastructure. The most obvious is the individual stocks of companies like Macquarie, Caterpillar, and Cemex.

But the opportunity to invest in Macquarie's business isn't constrained to its stock; the company also offers a number of closed-end funds that provide exposure to its infrastructure operations. The Macquarie First Trust Global Infrastructure Utilities Dividend and Income Fund (MFD Quote) and Macquarie Global Infrastructure Total Return Fund (MGU Quote) are two examples of Macquarie's funds that have each returned in excess of 20% since the start of 2006.