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 Fluor Corp. (NYSE:FLR) 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 engineer surveying a large-scale construction project.
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.
Overall, FLR ranks 5th on our list of best infrastructure stocks to buy according to hedge funds. While we acknowledge the growth potential of FLR, 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 FLR 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.
