In this article, we present to you the 12 best infrastructure stocks to buy now. If you’re in a hurry you can skip ahead to the 5 Best Infrastructure Stocks to Buy Now.
Infrastructure includes transportation, communication, networks, water, electric systems, and alike. It is a general term for the framework of a business, region, or nation. It is what links households to higher jobs, health care, and education opportunities. It helps improve the quality of human life. It also promotes economic growth by increasing the potential supply capacity of an economy,
A stable infrastructure with the right construction is what keeps businesses efficient and operational during tiring economic times. In a previous article, we listed the 10 best construction materials stocks to buy now.
Infrastructure is high on the list of priorities of the Biden administration in his campaign to “build back better” to provide stimulus and job opportunities. The administration proposed a $2 trillion energy and infrastructure plan to promote clean energy and modernize current US systems. Specifically, $900 billion on transportation, $700 billion on “Made in America,” $490 billion on clean energy, and $300 billion on other infrastructure.
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In a survey conducted by the 2020 Global Infrastructure Index, 79% agreed that investment in infrastructure will create new jobs and boost the economy. The survey also showed 68% believe that the government should prioritize infrastructure investments as part of the Covid-19 economic recovery.
During an economic recession, policymakers worry that infrastructure investments could not be mobilized quickly enough to help the economy while it is still in an unrecovered stage. This belief may be true, although the long term infrastructure investment would be worth it, increased spending on infrastructure particularly those that will add more jobs will boost economic prospects in the medium and long-term through much-needed improvements on facilities and connectivity. Moreover, increasing infrastructure investments provide fiscal expansion in an economy where aggregate demand growth has been slow for years. It could also aid the capital depending that is necessary for boosting productivity growth.
China is the largest investor of infrastructure in the world, investing an average of 8.5 percent of GDP between 1992 to 2011 on road and rail development, as well as on power and water installations. For 2020, China will focus on digital infrastructure where they allocated approximately $1.4 trillion. Today they are known to have one of the world’s largest economies with a GDP (PPP) of $25.27 trillion.
In order to identify the 12 best infrastructure stocks to buy now, we started with the 94 holdings in the Global X U.S. Infrastructure Development ETF as of December 02, 2020, and we were able to narrow down our list to 12 stocks by using the hedge fund sentiment scores.
Our in-house analysis has shown that we can classify a small group of stocks that can outperform the S&P 500 index on an average by double digits annually by using the hedge fund sentiment data. For example, since March 2017, our monthly newsletter portfolio of stock picks has beaten the market by more than 78 percentage points (see the details here). We have also been publicly posting some of the portfolio selections for our monthly newsletter. We shared this real estate stock idea in October and it is up around 50 percent now.
Based on our hedge fund sentiment data, we present to you the 12 best infrastructure stocks to buy now. These are the most popular infrastructure stocks among the 800+ hedge funds tracked by Insider Monkey:
12. Fastenal Company (NASDAQ:FAST)
No of HFs: 38
Total Value of HF Holdings: $700 Million
Fastenal Company is an industrial distributor based in Minnesota. The company markets industrial, safety, and construction supplies at the same time inventory management, manufacturing, and tool repair.
During the second quarter of 2020, the company reported diluted net earnings per share of $0.42, a 16.7% increase compared to $0.36 during the same period last year. We previously talked about FAST in this article.
Hedge funds are getting more bullish on FAST as the number of hedge funds with bullish bets increased from 34 at the end of June to 38 at the end of September. Cantillon Capital and Route One Investment Company are the two hedge funds with the largest FAST positions in our database.
11. Acuity Brands, Inc. (NYSE:AYI)
No of HFs: 38
Total Value of HF Holdings: $836 Million
Acuity Brands ranks 11th in our list of the best infrastructure stocks to buy now. AYI is a worldwide technology producer based in Atlanta, GA. The company manufactures innovative lighting products, controls, software, and services.
The company recently announced that award-winning communications leader, Ms. Steele Flippin will be heading all their global communications strategy. She was featured as one of the Most Influential Black Executives by Savoy Magazine. Bill Miller’s hedge fund talked about Acuity Brands in their Q3 investor letter:
“Acuity Brands is a leader in the lighting space. It has historically generated attractive returns on capital. We grew interested when the new CEO Neil Ashe, who we knew from his prior days at CNet and Wal-Mart.com, arrived. The company generates significant free cash flow with sustainable levels of roughly $400M per year (10% yield). While end markets are currently under pressure, Ashe’s vision is to drive a digital transformation in the business. There’s improvement potential from end market recovery along with internal business improvement. We think the stock is worth significantly more than where it’s trading.”
AYI is one of the 10 new stocks billionaire Ken Fisher just bought. Click here to view all the stocks Fisher just bought.
10. Martin Marietta Materials (NYSE:MLM)
No of HFs: 38
Total Value of HF Holdings: $1.9 Billion
Martin Marietta Materials is one of the leading suppliers of building materials, including aggregates, cement, and heavy materials. In 2019, the company sold 191 million tons of aggregates. For the third quarter of 2020, MLM reported a gross profit of $405 Million.
The top hedge fund holder is Robert Joseph Caruso’s Select Equity Group with over $804 million invested in the stock at the end of September.
The company recently announced the appointment of former mayor Mr. Anthony Foxx as an independent member of its board of directors. Mr. Foxx developed the first surface transportation bill during the Obama administration. Ward Nye, chairman, and CEO of MLM expressed his excitement to have Mr. Foxx on board,
“He is highly accomplished with an outstanding track record and brings unique knowledge and experience in both the public and private sector to our board. We are confident that Anthony will make an important, positive, and lasting impact on our company.”
9. Aecom (NYSE:ACM)
No of HFs: 39
Total Value of HF Holdings: $785 Million
Aecom ranks 9th in our list of the best infrastructure stocks to buy now and is one of the top infrastructure firms in the world. They have approximately 87,000 employees and is number 157 on the 2019 Fortune 500 list. During the fiscal year 2020, the company reported a revenue of $13.2 billion.
In an article published in November, we mentioned how hedge funds are trading ACM,
“The largest stake in AECOM (NYSE:ACM) was held by Starboard Value LP, which reported holding $224.6 million worth of stock at the end of June. It was followed by Renaissance Technologies with a $118.9 million position. Other investors bullish on the company included TIG Advisors, Blue Harbour Group, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Blue Harbour Group allocated the biggest weight to AECOM (NYSE:ACM), around 12.62% of its 13F portfolio. Starboard Value LP is also relatively very bullish on the stock, designating 8 percent of its 13F equity portfolio to ACM.
Judging by the fact that AECOM (NYSE:ACM) has faced a decline in interest from hedge fund managers, it’s safe to say that there was a specific group of hedge funds that slashed their positions entirely in the second quarter. Intriguingly, Zilvinas Mecelis’s Covalis Capital said goodbye to the biggest stake of all the hedgies monitored by Insider Monkey, totaling about $9.7 million in stock. Asad Rahman and Aman Kapadia’s fund, Akaris Global Partners, also said goodbye to its stock, about $8.3 million worth. These transactions are important to note, as total hedge fund interest dropped by 1 funds in the second quarter.”
8. United Rentals, Inc. (NYSE:URI)
No of HFs: 40
Total Value of HF Holdings: $797 Million
United Rentals, Inc. is one of the world’s largest equipment rental companies with a workforce of approximately 18,800 employees. For the third quarter of 2020, the company reported total revenue of $2.187 billion, including rental revenue of $1.861 billion.
URI is a relatively popular stock among hedge funds, but hedge funds have been taking some chips off the table throughout 2020. There were a total of 59 hedge funds with bullish URI positions at the end of September 2019. That figure dropped to 40 by the end of September 2020. Lyrical Asset Management is the biggest URI bull among the 800+ hedge funds tracked by Insider Monkey.
7. HD Supply Holdings, Inc. (NASDAQ:HDS)
No of HFs: 41
Total Value of HF Holdings: $1.1 Billion
HD Supply Holdings ranks 7th in our list of the best infrastructure stocks to buy now and is an industrial distributor in North America. For the third quarter of fiscal 2020, the company reported net sales of $827.5 million, an increase of $2.3 million or 0.3 percent as compared to the third quarter of fiscal 2019. Unfortunately, it may be a bit late to buy this stock now.
Recently, The Home Depot, Inc. headquartered in Atlanta, Georgia announced its acquisition of HD Supply Holdings in an all-cash deal for all common stock at $56 per share. The acquisition is expected to be completed on January 31, 2021 (Home Depot, Inc’s fiscal fourth quarter)
The top hedge fund holder is Seth Klarman’s Baupost Group with more than $281 million invested in the stock at the end of September.
6. Vulcan Materials Co. (NYSE:VMC)
No of HFs: 42
Total Value of HF Holdings: $1.3 Billion
Vulcan Materials Co. is an American company based in Alabama with approximately 7,000 people at over 300 facilities. The company is engaged in the manufacturing of construction materials, gravel, crushed stone, and sand. During the third quarter that ended September 2020, VMC posted revenue of $1.31 billion. Net earnings were US$200 million compared to US$216 million during the prior year’s comparable quarter.
The top hedge fund holder is John Armitage’s Egerton Capital Limited with $332 million invested in the stock at the end of September.
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Disclosure: No positions. 12 Best Infrastructure Stocks To Buy Now is originally published at Insider Monkey.
