We recently published a list of 12 Best Infrastructure Stocks to Buy According to Hedge Funds. In this article, we are going to take a look at where Crown Castle Inc. (NYSE:CCI) stands against other best infrastructure stocks to buy according to hedge funds.
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.
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).
A close-up of an array of cell towers on a distant hilltop.
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.”
Overall, CCI ranks 8th on our list of best infrastructure stocks to buy according to hedge funds. While we acknowledge the growth potential of CCI, 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 CCI but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
