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.
10. Sempra (NYSE:SRE)
Number of Hedge Fund Holders: 33
Sempra (NYSE:SRE) is an energy infrastructure company that operates in the US and internationally. It has three segments; Sempra California, Sempra Texas Utilities, and Sempra Infrastructure. It provides electricity and natural gas services and develops energy infrastructure through these segments.
Morgan Stanley upgraded the company’s price target to $98 from $85 in January. It’s expected to capitalize on Texas’s leading data center activity driven by AI spending. Despite recent challenges managing rising costs and declining California revenues, its stable core business and growth potential offer a compelling risk-reward profile. Its investments in LNG and renewable energy infrastructure underpin its positive investment outlook.
The company sees a massive need for infrastructure upgrades in the US. It estimates that over $600 billion is needed by 2030, and believes that the number could be even higher. Texas, which is a key market for Sempra (NYSE:SRE), is projected to see huge electricity demand growth, around 80% by 2030. This is partly fueled by AI and data centers, which could consume double the current state’s electricity by 2026. The company believes that high-voltage transmission is a prime opportunity, and notes that over 350 gigawatts of generation and storage projects are waiting to connect in Texas.
Sempra’s (NYSE:SRE) subsidiary, Oncor, is crucial to this. Oncor upgraded over 800 miles of transmission lines in FQ3 2024 and saw a 50% jump in requests for new large connections. The Permian Basin is another growth area, with demand projected to quadruple by 2038. This represents a huge investment opportunity (at least $13 billion), and Oncor expects to win a large share of the projects.
ClearBridge Dividend Strategy stated the following regarding Sempra (NYSE:SRE) in its Q2 2024 investor letter:
“Utilities rose largely on merchant power companies serving the data centers powering AI; the rest of the sector, along with real estate, suffered as rate cut expectations were pushed out. One exception was our holding Sempra (NYSE:SRE) — a well-managed and diversified utility holding company. Sempra possesses large franchises in Texas and California, as well as a large LNG business. Sempra is a leading player in each of its markets and all its segments enjoy robust growth outlooks, which should drive high-single-digit growth for the company overall.”
9. Exelon Corp. (NASDAQ:EXC)
Number of Hedge Fund Holders: 34
Exelon Corp. (NASDAQ:EXC) is a utility services holding company that focuses on energy distribution and transmission across the US and Canada. It purchases and sells electricity and natural gas, and manages the transmission and distribution of these energy sources to many customers. These include residential, commercial, and industrial customers.
In FQ3 2024, the company’s earnings per share reached $0.71, which was a $0.04 increase year-over-year, driven by a $0.03 boost from higher distribution and transmission rates. This underscores the financial impact of its infrastructure investments. The company now reaffirms its 5-7% annual earnings growth target through 2027 for this reason.
The company is investing heavily in infrastructure. Delmarva Power seeks a $35.6 million revenue increase for gas upgrades. PECO wants $354 million more for electric and $78 million for gas infrastructure. ComEd’s proposed plan includes a $637 million revenue and $3.9 billion rate base increase for grid modernization. The $9.7 billion Vienna-Nelson transmission line project highlights this commitment and improves reliability, which enables coal plant retirement (saving customers around $100 million), and supports local businesses.
These investments are crucial for grid resilience, reliability, and accommodating the demand from electrification and data centers. Exelon Corp. (NASDAQ:EXC) has completed its 2024 equity issuances and plans to raise an additional $1.6 billion through 2027 to support its $34.5 billion capital plan.
8. Crown Castle Inc. (NYSE:CCI)
Number of Hedge Fund Holders: 34
Crown Castle Inc. (NYSE:CCI) owns, operates, and leases a network of over 40,000 cell towers and about 90,000 route miles of fiber across major US markets. This infrastructure supports small cells and fiber solutions and connects communities and businesses to essential data, technology, and wireless services.
The company’s FQ3 2024 results were strongly driven by its infrastructure assets. It projects a 5% revenue growth in FY24, fueled by towers, small cells, and fiber, which capitalize on the rising data demand. For towers, the company is focused on revenue growth via digitization and automation, improving co-location and installations. Multi-year agreements with carriers also provide revenue stability. Small cells are seeing a strategic shift, as high-return opportunities are prioritized. At the same time, canceling low-yielding nodes saves $800 million in capital expenditure for the company, which improves the backlog and drives double-digit revenue growth.
These infrastructure-focused strategies are driving revenue growth and improved profitability. Adjusted EBITDA increased 3% in FQ3. Crown Castle Inc. (NYSE:CCI) also identified $65 million in operating cost reductions, compared to an initial forecast of $60 million. This is expected to reduce FY24 net capital expenditures by $300 million.
Columbia Seligman Global Technology Fund stated the following regarding Crown Castle Inc. (NYSE:CCI) in its Q3 2024 investor letter:
“The fund held two out-of-benchmark positions in Real Estate Investment Trust (REIT) companies American Tower Corporation and Crown Castle Inc. (NYSE:CCI). REITs have historically performed well during periods of declining interest rates due to lower borrowing costs. The two companies performed very well during the third quarter after the Federal Reserve cut interest rates 50 basis points in September, with the expectation for additional cuts soon.”
7. American Electric Power Company Inc. (NASDAQ:AEP)
Number of Hedge Fund Holders: 36
American Electric Power Company Inc. (NASDAQ:AEP) is an electric public utility holding company that generates, transmits, and distributes electricity to retail and wholesale customers across the US. It operates through four segments; Vertically Integrated Utilities, Transmission and Distribution Utilities, AEP Transmission Holdco, and Generation & Marketing. It utilizes diverse energy sources, which include coal, natural gas, renewables, and nuclear.
In FQ3 2024, the company earned $1.85 per share, which led to tighter full FY24 guidance. Long-term earnings growth of 6% to 8% is projected from a 2025 base, which is backed by a $54 billion infrastructure-focused capital plan. This plan, which is a 25% increase over the prior one, has the potential for further expansion due to continued load growth. The company’s transmission system, which is already a major earnings contributor, will see significant investment.
Load growth is a key driver for American Electric Power Company Inc. (NASDAQ:AEP), with 20 gigawatts in customer commitments through 2029, which mainly comes from data centers. Strong commercial load growth is already being seen, and an 8.3% overall sales increase is projected for 2025. This would be driven by double-digit commercial growth in Ohio, Indiana, and Texas. These increases necessitate substantial infrastructure improvements. The $54 billion capital plan, which is focused on wires and generation, is expected to deliver a strong rate base CAGR.
However, as January began, BMO Capital lowered the company’s price target to $100 from $108 despite an Outperform rating. This follows its $2.82 billion deal to sell a 19.9% stake in its Ohio/Indiana & Michigan Transcos to KKR (Kohlberg Kravis Roberts & Co., a global investment firm) and PSP Investments (a Canadian crown corporation investment manager).
6. Williams Companies Inc. (NYSE:WMB)
Number of Hedge Fund Holders: 37
Williams Companies Inc. (NYSE:WMB) is an energy infrastructure company that operates in the US. It has four segments; Transmission & Gulf of Mexico, Northeast G&P, West, and Gas & NGL Marketing Services. Through these segments, it gathers, processes, and transports natural gas and natural gas liquids (NGLs), and provides related marketing services.
Following a market downturn triggered by the DeepSeek news, this company saw its stock price decline. Despite optimism about AI-driven power demand boosting pipeline stocks, UBS analysts believe that Williams Companies Inc. (NYSE:WMB) has upside potential. They argue that while DeepSeek might be less power-intensive and cheaper, it could accelerate AI adoption. They think that increased efficiency will lower AI product prices, which leads to broader adoption.
The company’s FQ3 2024 results highlight strategic infrastructure investments. Record-adjusted EBITDA was achieved through natural gas transportation expansions and the Gulf Coast Storage acquisition, which led to raised FY24 guidance. These projects are generating substantial returns. The infrastructure-driven performance supports a projected 7%+ EBITDA CAGR through FY25. Key contributors to this growth are contracted pipeline projects, which include Transco’s Regional Energy Access and the large-scale Southeast Supply Enhancement Project (SESE).
Further infrastructure development includes deepwater connections, expansions of existing pipeline systems, and a new solar farm project. Williams Companies Inc. (NYSE:WMB) emphasizes the demand environment for natural gas infrastructure and anticipates growth opportunities tied to increasing energy needs.
5. Fluor Corp. (NYSE:FLR)
Number of Hedge Fund Holders: 39
Fluor Corp. (NYSE:FLR) is a global engineering and construction firm that provides a range of services, including EPC, fabrication, operations and maintenance, and project management. It operates through four segments; Energy Solutions, Urban Solutions, Mission Solutions, and Others.
The company’s revenue reached $4.1 billion in FQ3 2024. Urban Solutions, which focuses on infrastructure and industrial projects, reported a $68 million profit and a 72% year-over-year backlog increase to $19 billion. This growth was fueled by infrastructure projects within Mining and Metals (for instance, a $289 million rare earth refinery award), and Advanced Technologies and Life Sciences (for instance, the Eli Lilly facility).
While legacy infrastructure projects presented challenges, progress continued on initiatives like the Gordie Howe International Bridge. This is a new bridge connecting Detroit, Michigan, and Windsor, Ontario, across the Detroit River. Mission Solutions, which provides services to the US government, secured the massive $45 billion Hanford environmental management contract. This is an agreement for Fluor Corp. (NYSE:FLR) to manage environmental cleanup and remediation at the Hanford Site, a former nuclear production complex. These wins position the company for continued growth.
ClearBridge Small Cap Growth Strategy initiated 5 new positions in Q4 2024, including Fluor Corp. (NYSE:FLR), as it is poised to benefit from megaprojects in sectors like data centers and nuclear energy. The firm stated the following regarding the company in its Q4 2024 investor letter:
2024 proved a particularly active year for new idea generation: we added 23 new investments while exiting 29 due to a variety of considerations, including acquisitions, market capitalization constraints, and our assessment of forward return potential. While many of the new investments we made during the year are of relatively modest size, we will continue to build these positions over time provided company execution and end market prospects remain intact. In the fourth quarter we initiated five new investments: Oscar Health, TG Therapeutics, Clearwater Analytics, Fluor Corporation (NYSE:FLR) and Modine.
Fluor is one of the largest engineering, procurement and construction firms, with global scale supporting megaprojects across various end markets. With an improved contract structure mix and balance sheet, the company is poised to benefit from an array of high-priority investment projects in markets such as data centers, GLP-1 manufacturing, mining and nuclear energy.
4. Kinder Morgan Inc. (NYSE:KMI)
Number of Hedge Fund Holders: 42
Kinder Morgan Inc. (NYSE:KMI) is an energy infrastructure company that primarily operates in North America. It has four segments, Natural Gas Pipelines, Products Pipelines, Terminals, and CO2. It owns and operates a network of pipelines (~82,000 miles) and terminals (139). It transports and stores natural gas, refined petroleum products, crude oil, and other commodities. It also produces, transports, and markets CO2 for enhanced oil recovery.
The company is heavily invested in infrastructure growth, particularly in natural gas. It has approved four major pipeline projects (GCX expansion, SS4 expansion, Mississippi Crossing, and Trident) totaling over $5 billion in investment and adding over 5 billion cubic feet/day of transport capacity. Long-term contracts back these projects. The Outrigger acquisition further expands its Bakken presence. The Bakken is a large shale oil and gas formation in North Dakota, Montana, and Saskatchewan (Canada).
In 2024, Kinder Morgan Inc. (NYSE:KMI) secured $6.3 billion in new projects, boosting its backlog from $3 billion to $8.1 billion. This projected growth is expected to fuel future EBITDA and EPS increases. It also acquired a Bakken gathering and processing system for $640 million. The company sees natural gas growth potential and projects a 28 billion cubic feet/day increase by 2030.
In the last days of January, the company’s stock price dropped 9.25%, continuing a multi-session decline. A CFRA analyst noted the market’s overreaction to DeepSeek AI’s emergence and stated that it won’t impact its earnings in 2025 or 2026 due to the emerging stage of AI data center construction and the continued demand for natural gas in manufacturing.
3. Caterpillar Inc. (NYSE:CAT)
Number of Hedge Fund Holders: 50
Caterpillar Inc. (NYSE:CAT) manufactures construction and mining equipment, off-highway diesel and natural gas engines, industrial gas turbines, and diesel-electric locomotives. It operates through four segments; Construction Industries, Resource Industries, Energy & Transportation, and Financial Products. It provides machinery, engines, and financing solutions to diverse industries worldwide.
The company’s 2024 performance demonstrates growth driven by infrastructure-related activities, despite a 3% overall sales decline. Services revenue, which is a key component tied to infrastructure maintenance and upgrades, grew 4% to a record $24 billion. This growth reflects the company’s focus on supporting existing infrastructure through connected assets, digital tools, and customer value agreements.
Looking ahead to 2025, Caterpillar Inc. (NYSE:CAT) anticipates strength in its energy and transportation segments, both heavily involved in infrastructure development. It expects growth in power generation, which is driven by demand for data centers and AI, as well as transportation led by rail services. While overall sales are projected to be lower in 2025, the growth in services and targeted infrastructure-related segments, along with a projected $2.5 billion in capital expenditure (including investments in large engine capacity), underscores the focus on infrastructure as a driver of growth.
Diamond Hill Large Cap Strategy stated the following regarding Caterpillar Inc. (NYSE:CAT) in its Q3 2024 investor letter:
“Other top Q3 contributors included HCA Healthcare and Caterpillar Inc. (NYSE:CAT). Heavy construction machinery manufacturer Caterpillar has held up better than industry peers against a challenging macroeconomic backdrop and a generally slowing construction environment.”
2. Cheniere Energy Inc. (NYSE:LNG)
Number of Hedge Fund Holders: 62
Cheniere Energy Inc. (NYSE:LNG) is an energy infrastructure company that focuses on LNG-related businesses in the US. It owns and operates the Sabine Pass LNG terminal in Louisiana and the Corpus Christi LNG terminal in Texas, along with connecting pipelines. It’s also involved in the marketing of LNG and natural gas.
On January 31, Morgan Stanley increased its price target for the company to $255, due to the anticipated Sabine Pass expansion following the lifting of the US LNG project permitting pause. This expansion refers to the company’s planned project to increase LNG production capacity at its Sabine Pass facility. Cheniere Energy Inc.’s (NYSE:LNG) core business revolves around its infrastructure for producing and exporting LNG. In FQ3 2024 alone, it generated $820 million in distributable cash flow and $900 million in net income.
Cheniere Energy Inc. (NYSE:LNG) is actively expanding. The Corpus Christi Stage 3 project is a prime example. This expansion, currently under construction, is expected to increase the company’s LNG production capacity. With the first train slated for completion in early 2025, this project will add volumes to its output, and translate to higher revenue streams. The company is projecting 47 to 48 million tons of LNG production, a jump from its current levels. This increased production capacity will boost its revenue and provide greater flexibility in the market.
TimesSquare Capital U.S. Mid Cap Growth Strategy stated the following regarding Cheniere Energy, Inc. (NYSE:LNG) in its Q3 2024 investor letter:
“We often see the ebb and flow of the Energy sector tied to underlying commodity prices. In this area, we seek low-cost exploration & production companies with high-yielding acreage or specialized service providers. Cheniere Energy, Inc. (NYSE:LNG) operates liquefied natural gas terminals in New Orleans and Corpus Christi. Second quarter results were largely as expected and forward guidance was increased. Management’s comments featured the timely completion of maintenance at both facilities as well as optimization efficiencies. That boosted the stock by 3%.”
1. NextEra Energy Inc. (NYSE:NEE)
Number of Hedge Fund Holders: 69
NextEra Energy Inc. (NYSE:NEE) generates, transmits, distributes, and sells electric power to retail and wholesale customers across North America. Using a diverse mix of energy sources, which include wind, solar, nuclear, and natural gas, it has a net generating capacity of ~33,276 megawatts. It also develops and operates clean energy solutions and participates in wholesale energy markets.
The company’s $150+ billion decade-long investment in energy infrastructure, with another $120 billion planned, is the key to its growth. This includes nuclear, gas, and renewables/storage, which drive consistent financial outperformance. The company added 8.7 GW of renewables/storage in 2024, with Energy Resources booking a record 12 GW in new projects, marking a 30% increase year-over-year and totaling a 25+ GW backlog. This renewable infrastructure expansion fuels growth.
FPL’s (Florida Power & Light) $8.2 billion 2024 investment in grid modernization and generation strengthens reliability and drives stable returns. It’s the largest electric utility in the state of Florida and one of the largest in the US. FPL is a subsidiary of NextEra Energy Inc. (NYSE:NEE). $36 billion more is planned through 2025, which emphasizes utility infrastructure development. The company’s infrastructure focus translates to 8%+ EPS growth in 2024 and a 10%+ CAGR since 2021. These investments directly drive revenue and profitability.
Following the company’s Q4 2024 report, Argus analyst Marie Ferguson lowered the price target to $86 from $90 on January 27, while maintaining a Buy rating. The price target adjustment reflects a correction after the 2024 sector momentum driven by interest rates. However, analysts remain optimistic about the company’s Florida operations due to the state’s economic and population growth.
Madison Sustainable Equity Fund stated the following regarding NextEra Energy, Inc. (NYSE:NEE) in its Q3 2024 investor letter:
“The top contributors in the quarter were NextEra Energy, Inc. (NYSE:NEE), Oracle Corporation, Progressive Corporation, Equifax Inc., and United Healthcare. NextEra has continued to perform well given its strong position in the renewable energy space, increasing demand for power, its transmission capabilities, as well as a tailwind from lower interest rates.”
While we acknowledge the growth potential of NextEra Energy Inc. (NYSE:NEE), our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than NEE but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap.
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