Martin Marietta Materials (NYSE:MLM)
Martin Marietta Materials is one of the United States’ largest producer of construction aggregates (crushed stone, sand, and gravel). In 2021, Martin Marietta sold 201 million tons of aggregates. Martin Marietta’s most important markets include Texas, Colorado, North Carolina, Georgia, and Florida, accounting for most of its sales. The company also produces cement in Texas and uses its aggregates in its asphalt and ready-mixed concrete businesses. Martin’s magnesia specialties business produces magnesia-based chemical products and dolomitic lime.
Vulcan Materials (NYSE:VMC)
Vulcan Materials is the United States’ largest producer of construction aggregates (crushed stone, sand, and gravel). Its largest markets include Texas, California, Virginia, Tennessee, Georgia, Florida, North Carolina, and Alabama. In 2020, Vulcan sold 208 million tons of aggregates, 12 million tons of asphalt mix, and 3 million cubic yards of ready-mix. As of Dec. 31, 2019, the company had more than 16 billion tons of aggregates reserves.
Fluor is one of the largest global providers of engineering, procurement, construction, fabrication, operations, and maintenance services. The firm serves a wide range of end markets including oil and gas, chemicals, mining, metals, and transportation. The company’s business is organized into three core segments: urban solutions, mission solutions, and energy solutions. Fluor employs over 40,000 workers in more than 60 countries. The company generated $12.4 billion in revenue in 2021.
Crown Castle (NYSE:CCI)
Crown Castle International owns and leases roughly 40,000 cell towers in the United States. It also owns more than 80,000 route miles of fiber. It leases space on its towers to wireless service providers, which install equipment on the towers to support their wireless networks. The company’s fiber is primarily leased by wireless service providers to set up small-cell network infrastructure and by enterprises for their internal connection needs. Crown Castle’s towers and fiber are predominantly located in the largest U.S. cities. The company has a very concentrated customer base, with more than 70% of its revenue coming from the big three U.S. mobile carriers. Crown Castle operates as a real estate investment trust.
American Water Works (NYSE:AWK)
Founded in 1886, American Water Works is the largest investor-owned U.S. water and wastewater utility, serving approximately 3.5 million customers in 16 states. It provides water and wastewater services to residential, commercial, and industrial customers and operates predominantly in regulated markets, which account for about 90% of earnings. Its nonregulated market-based businesses provide complementary water and wastewater services for municipalities and military bases.
Who stands to benefit most from a heralded infrastructure boom? Companies that supply the materials and take on projects.
While the sector remains at a standstill like the rest of the broader economy, investing in infrastructure stocks now might put you ahead of the curve. Here are a few stocks to keep an eye on., remembering that infrastructure will always be an issue, and the largest companies in this sector will always have massive contracts at their fingertips.
Overview: Infrastructure Stocks
Infrastructure can refer to the buildings that house our industries, the pipes and plumbing that keep fuel and water running and electricity power lines and panels. Infrastructure is essentially everything you don’t see — yet our economy and society can’t function without it.
It’s often grouped into the industrial sector due to materials and construction. But infrastructure companies can also be utilities, tech firms or aerospace and defense contractors.
Infrastructure stocks currently sit at a standstill — no one’s building anything with the country shutdown. If you want to invest in infrastructure stocks, understand that you likely won’t see outsized returns until the pandemic passes.
An investment in infrastructure companies is an investment for the long haul, and the companies poised to profit from increased spending on infrastructure reside in the following industries:
- Materials: Infrastructure projects need steel, lumber, plastics and plenty of other materials for completion. The companies that produce these goods will do well when it comes time to refurbish roads, bridges and railways.
- Energy: Electrical grids and power stations are on the shortlist of infrastructure that needs a facelift, but energy companies also supply the power needed to execute high-level projects.
- Transportation: Companies that transport the raw materials and machinery needed to complete infrastructure projects such as trucking, shipping, rails, airlines and pipelines.
- Construction and engineering. Designers, developers and builders. These are the firms that make new infrastructure projects a reality.
Projects are broken down into 2 categories: hard infrastructure and soft infrastructure.
Hard infrastructure refers to the networks and channels that make economic activity possible. Roads, communications networks, airports, energy distribution channels and water and sewer systems all fall into the hard infrastructure category.
Soft infrastructure refers to the facilities and networks that maintain societal health, such as schools, hospitals, police and firefighting forces and public parks. Most of the stocks here are focused on building and maintaining hard infrastructure.
Best Online Brokers for Infrastructure Stocks
Investing in infrastructure stocks can solidify your portfolio, but you’ll need an appropriate broker to execute the best possible trades. Most infrastructure stocks have significant volume and shares aren’t in short supply among major brokers.
Choosing a broker comes down to your trading style. If you want to day trade, make sure you use a broker with sophisticated charting tools so you can maximize your entry and exit points.
Features to Look for in Infrastructure Stocks
- Increasing dividends: Infrastructure stocks are often from older, established companies that don’t spend money on research and development. Dividend payments can be an attractive feature, and the cream of the crop has a history of increasing them frequently. Look for companies that have been increasing dividends for a number of years.
- Stable cash flow and low debt: Much like the oil and gas sector, infrastructure companies buy or lease expensive equipment that depreciates in a hurry. But the best infrastructure companies keep debt load manageable and cash flow steady.
- Strong margins: Margin is the difference in the cost of producing a good or service versus what the business makes by selling it. Infrastructure projects can have tight budgets that often run over. Companies that maximize each dollar have the most successful stocks.
Reinforcing Your Portfolio with Infrastructure Stocks
Infrastructure stocks might not seem like wise investments at the moment. But there’s sure to be an upswell in support for new projects as the government may look to infrastructure spending as a way to kickstart the economy.
Investing in infrastructure won’t provide superior returns right away, but it is a talking point among politicians in every state. At some point, there will need to be upgrades and changes to the national infrastructure, and these firms could stand to benefit from those changes.