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 Williams Companies Inc. (NYSE:WMB) 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 bird’s-eye view of an oil & gas midstream platform in the Gulf of Mexico on a clear day.
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.
Overall, WMB ranks 6th on our list of best infrastructure stocks to buy according to hedge funds. While we acknowledge the growth potential of WMB, 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 WMB 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.
