Wanna buy a turnpike?
Such a purchase is probably beyond the typical
investor. But there are bigger fish out there looking to do just that.
You may have heard about Australia's
Macquarie Investment Group's recent purchases of the Indiana Toll Road and the Chicago Skyway Bridge.
So what's the attraction?
Cash flow. After making some improvements, these investments will throw off free cash for years. But I'm thinking of another and much bigger way to play infrastructure.
Simply put, much of our infrastructure was built in the last century, and some of it -- like water pipes and railroad bridges -- was even built in the century before that.
Everywhere you look you'll find water and sewer systems, traditional roads, interstate highways, bridges, ports, railroad structures, airport runways, electric power and oil and gas energy infrastructure and a whole lot else.
It's all getting old. The clock is ticking, and sooner or later all of it will need replacing.
Just for an example, many water systems in bigger East Coast cities were installed between 1880 and 1920. And those installed more recently, in some West Coast cities and in suburbs, are newer but weren't built to last as long. New plastic pipe may give 50, not 100, years of useful life.
Then there's the exploding demand for new infrastructure -- not so much in the U.S., but in the growing world economies, especially in India and China.
And infrastructure stocks are good inflation plays, too. Have you ever heard of big construction projects getting cheaper?
Click here for the video version of this story from Jennifer Openshaw.
Put it all together, and I'm a big believer in bricks, mortar, concrete, pipes and all of the stuff that makes that stuff work. Here are some picks:
- Heavy construction firms. Companies like Chicago Bridge & Iron (CBI) , Granite Construction (GVA) - Get Report and the smaller and less well known Sterling Construction (STRL) - Get Report put it all on (or in) the ground.
- Materials. There's a huge market for basic materials to build with. Plays include Vulcan Materials (VMC) - Get Report and Hanson PLC( HAN), as well as Mexican cement producer Cemex (CX) - Get Report. The latter two bring international exposure and pay a decent dividend.
- Engineering. Before it's built, somebody's got to design it, and leaders in the field include Tetra Technologies (TTEK) - Get Report, Washington International Group( WNG), Jacobs Engineering Group (JEC) - Get Report and the smaller and lesser known regional player WillDan Group (WLDN) - Get Report.
- Equipment. Terex (TEX) - Get Report and Manitowoc (MTW) - Get Report make construction cranes and the like, and have been on a boom lately (no pun intended). I'd watch and buy on weakness. Traditional standbys like Caterpillar (CAT) - Get Report and Deere (DE) - Get Report work here, too.
- Infrastructure ETFs. Pure ETF plays are few and far between, especially since construction- and materials-related indices have a lot of residential construction offerings mixed in -- not a good thing right now. One worth a look is the PowerShares Dynamic Building and Construction Portfolio (PKB) - Get Report. Popular emerging market ETFs, for example the BRICs (Brazil, Russia, India and China), have a lot of infrastructure companies -- that's another way to play.
- Infrastructure operators. You can go the other route and play infrastructure operators. Australia's Macquarie is a big niche player in this arena and offers closed-end funds with rather lengthy names like Macquarie First Trust Global Infrastructure Utilities & Income Fund (MFD) - Get Report, Macquarie Global Infrastructure Total Return Fund (MGU) - Get Report and the Macquarie Infrastructure Company Trust (MIC) - Get Report. There is also a SPDR ETF available based on the FTSE/Macquarie Global Infrastructure 100 ETF (GII) - Get Report.
Fair warning: I'm not the first to discover or recommend this opportunity, and as a result, a lot of these investments are approaching 52-week highs. As always, buy carefully.
But if you're a true long-term player like I am, there's a lot to like in this play.
Jennifer Openshaw, a passionate advocate for helping Americans improve their finances and build their personal fortunes, is author of the hit new book
The Millionaire Zone
The Millionaire Zone, and
AOL's Personal Finance Editor. In addition to appearing regularly on such shows as Oprah, CNN and Good Morning America, Jennifer is host of ABC Radio's
Winning Advice and serves as an adviser to some of America's top corporations. Visit her at