Doug Rachlin, Neuberger Berman senior portfolio manager, joined CNBC’s ‘Squawk on the Street’ on January 27 to discuss why he believes that the current opportunity set in infrastructure is the best he has seen in three decades. Managing this strategy since the summer of 1996, Rachlin pointed to several factors driving his optimism. One major aspect is the role of midstream infrastructure companies in supporting energy dominance in the US. The US leads globally in propane exports, accounting for 46% of worldwide supply.
Rachlin emphasized that these investments align with principles from investors like Charlie Munger. He advocates for concentrated investing based on strong conviction rather than spreading bets thinly across many stocks. Regarding recent developments that might impact pipeline companies involved in natural gas transmission, such as news related to deep sea activities, Rachlin noted that natural gas prices reaching $4 were due to cold winter weather rather than AI-driven data center buildouts. He highlighted growth prospects for LNG exports over the next decade, which could reach up to 35 billion cubic feet per year under favorable policies initiated during Trump’s administration.
This growth aligns well with Neuberger Berman’s focus on midstream infrastructure within their broader energy transition strategy. The firm emphasizes utilities, renewables, and Master Limited Partnerships alongside traditional energy assets like pipelines critical for transporting natural gas. This is a vital component in powering data centers across the country. As LNG exports are set to double over four years (from ~13 billion cubic feet today to potentially over 25 billion cubic feet by end-2028) and possibly reach even higher levels thereafter, the demand for robust midstream infrastructure will continue growing. This scenario underscores why Rachlin views current opportunities as compelling within his long-standing career managing this sector-focused investment strategy.
The infrastructure asset management (IAM) market is booming. It was worth $37.65 billion in 2022 and is predicted to grow by 8.9% each year until 2030. This is because companies are using these services to save money on infrastructure maintenance. Industries like manufacturing and oil and gas use IAM to optimize existing assets and ensure upkeep, especially since upgrading older designs is expensive. For example, much of the US’s energy infrastructure is 25+ years old, and Europe struggles with water waste due to leaky pipes. IAM helps maximize return on assets, improving quality and productivity.
With this being acknowledged, we’re here with a list of the 12 best infrastructure stocks to buy according to hedge funds.
Methodology
We first sifted through ETFs, online rankings, and internet lists to compile a list of the top infrastructure stocks to buy. We then selected the 12 stocks that were the most popular among elite hedge funds and that analysts were bullish on. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q3 2024. The hedge fund data was sourced from Insider Monkey’s database which tracks the moves of over 900 elite money managers.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
12 Best Infrastructure Stocks to Buy According to Hedge Funds
12. Aecom (NYSE:ACM)
Number of Hedge Fund Holders: 24
Aecom (NYSE:ACM) is a global infrastructure consulting firm that provides services ranging from planning and design to construction management and investment. It serves sectors that include transportation, water, government, and energy. It delivers expert solutions for public and private clients worldwide.
Its FQ1 2025 Net Service Revenue (NSR) rose 5.5%, driven by a 9% NSR jump in the Americas Design business. This growth stems from a record backlog (up 5% overall and 7% in Americas Design) and a record pipeline with double-digit growth in later-stage pursuits. It won 100% of its largest Q1 pursuits. Program Management, which is a high-margin service, now accounts for over 15% of total revenue, having tripled in four years. The company is also building its next $1 billion NSR platform, the Water and Environment Advisory, currently at ~$200M annual revenue and projected to double within three years. This advisory business targets markets like the $70 billion Digital Water and $200 billion non-revenue water sectors.
The company is positioned to capitalize on secular growth drivers in infrastructure, sustainability, resilience, and energy. In the US, it’s aligned with the administration’s priorities, including energy independence and infrastructure investment. Internationally, it’s seeing opportunities in the UK water sector, energy and transmission infrastructure, and in the Middle East, driven by mega-projects and global events.
11. Enbridge Inc. (NYSE:ENB)
Number of Hedge Fund Holders: 26
Enbridge Inc. (NYSE:ENB) is an energy infrastructure company that operates across North America. it has five main segments; Liquids Pipelines, Gas Transmission and Midstream, Gas Distribution and Storage, Renewable Power Generation, and Energy Services. It transports and distributes oil and natural gas, generates renewable power, and provides energy marketing services.
The company’s FQ3 2024 performance demonstrated growth due to infrastructure-focused activities. A major reason was the acquisition of three US gas utilities, now the largest in North America. It serves about 7 million customers and delivers over 9 billion cubic feet of gas daily. Its Ingleside crude export facility also performed well and set single-day (2.6 billion barrels) and monthly (1.2 million barrels per day) volume records.
It’s heavily investing in growth and is on track to place $5 billion of secured capital into service in FY4. It has added another $7 billion to its secured growth program for future projects. These projects are diverse, including a 15% interest in the TBR gathering system, the ~800 MW Sequoia Solar project, and new pipelines serving British Petroleum’s Gulf of Mexico development.
The company is also expanding its existing infrastructure. Ingleside’s storage capacity is increasing by 2.5 million barrels (expected 2025 in-service), and it’s developing a 6.5 billion cubic feet gas storage expansion. Modernization efforts are underway in Ohio and Utah. Gas transmission is growing through projects like the Blackcomb Pipeline and the Venice Extension Project. Renewables development includes over 2 GW of projects.