The Best Way to Play Infrastructure

Infrastructure investing has popped up on more investors' radar in the last few years as the need for building or updating highways, sewers, water systems and so on has become all too apparent.

The numbers involved are staggering, even if inconsistent from report to report.

I found one report saying the U.S. needs to spend $400 billion, a different report saying India needs to spend $320 billion and a third item that estimates that the planet needs to spend $2 trillion annually through 2015.

This stands to benefit companies that do the building, the companies that contract the building, the various distributors of services and a few others segments.

Interestingly, the various groups within infrastructure have a very low correlation to each other. That might make this a less risky sector to overweight than many others are -- if the overweighting is done correctly.

The best way to do this would be to take one name from each of several subgroups within infrastructure.

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Here is an example of how to assemble a combination of infrastructure stocks that don't correlate with each other, but all stand to benefit from the trillions to be spent.

The stocks randomly selected from disparate segments within infrastructure as follows;

Zhejiang Expressway(ZHEXY Quote), a toll road company in China

ABB(ABB Quote), an engineering company in Switzerland

National Grid(NGG Quote), which works on electricity transmission and generation in the U.K.

Japan Airport Terminal(JAIRF Quote), airport terminal management and services in Japan

Veolia(VE Quote), all things water in France

There are many other stocks from each segment that could have been studied as well.

The case for investing in toll roads and airport-related stocks is that they capture what is happening on the ground in these countries. The case for the distributors (be it water, electricity or something else) is that people in developed countries pay monthly to have these services, and people in developing countries are willing to pay for the same services. The case for the engineers and builders is that infrastructure must be updated in some countries and built out for the first time in others.