One of the major themes of 2009 to this point has been investor speculation on global infrastructure. With the recent $787 U.S. stimulus package signed into law by President Barack Obama, analysts are at a crossroads in looking where to invest to get the best exposure to bailout money. But where exactly is the money going to be? After digging into the stimulus, it seems to me that all signs are pointing to the road and water infrastructure as leading areas of the package.
If you want the “pure play” on this plan, one needs to look beyond the larger companies and focus on the smaller market cap, more niche, investments in infrastructure. Having a look into the “water” space can yield some big winners as the global water shortage scare starts to take effect in the face of huge capital injections into deserving companies. Small market cap companies in the stock market could have big advantages as money starts to pour into the system.
The Problem with Large Cap Companies
When most investors consider stocks that will be “plays on the stimulus package,” they often mis-represent the relative exposure that is obtainable. In most recommendations, we find companies like Caterpillar (CAT: 27.02, 0.00 (0.00%)). Caterpillar is a fantastic construction giant… and they do indeed have exposure to highway infrastructure among other infrastructure building projects. The downside to investing in a larger company like Caterpillar is that you need to deal with all of the excessive business segments of the company… areas that build cranes and erect commercial buildings, for example. More than likely, if you are looking for a “pure play” stimulus stock you want to be able to focus on a specific niche area of the plan. Now I’m not saying that big construction companies like Caterpillar, or safer engineering & construction companies like Jacobs Engineering (JEC: 35.57, 0.00 (0.00%)) and Fluor (FLR: 37.97, 0.00 (0.00%)), aren’t worth your while. However, if you want to bet big, you better have a specialist!
Plays on Water Infrastructure
You may have heard recent “doomsday” forecasts of a global water shortage. The global demand for water has tripled over the past 50 years, and the U.S. government has projected that 36 states will run into water shortages in less than five years.
