Buying Into the Global Infrastructure Build

by: Roger Nusbaum

The infrastructure build out going on globally has legs. I saw one report a week or two ago that estimated more than a trillion dollars will be spent every year through 2015. You could probably find a report that said whatever you needed it to say but clearly there is going to be a lot of capital deployed for quite a while to come.

I wondered if you could find an infrastructure stock for each SPX sector. Maybe this can be a collaborative effort. I know I will miss things, so please feel free to comment on what I do miss. In this way we might all learn something.

Some of things I mention will be a bit of a stretch. That's the point, it's a theoretical exploration.

Technology - This one is not easy. Part of the modernization of many of the countries is the Internet. This for sure means networking products and storage of data. The bigger names would include Cisco (NASDAQ:CSCO) and (EMC). There are obviously smaller names and foreign names that could be part of the discussion.

Financials - Ok, I may be on my own with this one but I think that the exchange stocks represent the financial infrastructure of a country. Most of the exchange stocks I know of (both domestic and foreign) have been pounded on in 2008. One exception is a stock I wrote about for TSCM in March called Climate Exchange PLC (OTC:CXCHF) which is listed in London. They are the main player in carbon credit trading. The growth in trading volume is huge, yet it is so small that it might as well not even exist yet.

I bought a little for myself but I had a tough time doing the diligence I think is necessary to own it for clients. Maybe I can access more information in the future. Stock or futures exchanges are infrastructure for the flow of capital. There is modernization within that occurs. Some countries have very primitive stock markets that will only modernize in the future. Who knows how quickly this will happen but it will happen. This may involve more consolidation or other forms of investments but I believe the theme is investable for people who are so inclined.

One other thought here would be Macquarie Group (OTCPK:MQBKY) and Babcock & Brown (BBNLF), two Aussie banks with a lot of infrastructure funds between them.

Healthcare - I have two thoughts here but the argument is weak. First is hospitals. I found four but there are probably others. Lifepoint (NASDAQ:LPNT), Community Health Systems (NYSE:CYH), Health Management Associates (NYSE:HMA) and Tenet Healthcare (NYSE:THC). I have never studied this group. I am vaguely familiar with Tenet for what I believe were some accounting issues a few years ago. All four of these are a long way from their 52 week highs, which is a surprise. I might expect a counter-cyclical aspect to these.The other thought would be any companies that do medical billing. I am not aware of any stocks that do this but if you know of any please leave a comment.

Industrial - This is one of the easiest sectors. You could include any of the toll roads, airports, engineers, certain parts of the water theme or Japanese nuclear plant builders. Energy Infrastructure Fund (pipelines and the like) probably fit the bill here. The two biggest names in the iShares (NYSEARCA:IGF) for this space are Williams (NYSE:WMB) and TransCanada Corp (NYSE:TRP). Some may disagree but I think windmills fit in here. Vestas (OTCPK:VWDRY) is big cog here but there are others.

Telecom - The story here is similar to tech. One way or another more people will have telephone access (most likely cell phone). This could also mean things like towers; American Tower (NYSE:AMT), Crown Castle (NYSE:CCI) and SBA Communications (NASDAQ:SBAC) are three I found. If you know any others please leave a comment.

Utilities - This one is easy too. Pretty much anything in the SPDR FTSE/Macquarie Infrastructure ETF (NYSEARCA:GII), which is 90% utilities probably fits.

Materials - This one is weak too but I suppose mining equipment (but then that drifts into industrial), mining companies that are big producers in countries that primarily resource countries, maybe certain kinds of chemical companies, anyone else have some ideas here?

Staples and Discretionary - I don't have anything here. If there are any you can think of here please leave some comments. This post is really about process. There have been past posts about some of these things and hopefully this one furthers the discussion.