With the President unveiling his latest efforts to revive the U.S. economy back in September, infrastructure has once again become the topic du jour. During the depths of the financial crisis, a variety of nations used construction and infrastructure spending as a way to jump-start their stagnant economies. Investors flocked into funds like the iShares S&P Emerging Markets Infrastructure (Nasdaq:EMIF) as a way to access the theme. Despite the nearly $3 trillion already spent on global infrastructure construction during 2009 and 2010, analysts calculate there is still more work to be done. The Obama administration's recent pledges along with the emerging world's spending goals still make the theme valid for the long term.
Investopedia Markets: Explore the best one-stop source for financial news, quotes and insights.

Pick-n-Shovel Part II
The latest jobs package from the Obama administration included $30 billion for modernizing public schools, $27 billion for the highway system, $9 billion for rail systems and $15 billion for the rehabilitation of homes, businesses and communities. The jobs package also creates a $10 billion National Infrastructure Bank that would provide funding for infrastructure projects. The bank would sell bonds like Ginnie Mae to get private investors involved. While any amount of spending on our nation's infrastructure is good, this is still a drop in the bucket compared to the amounts needed as estimated by American Society of Civil Engineers. The group predicts that our nation will require $2.2 trillion in spending over the next five years to repair our poor infrastructure. By 2030, investment needs for electricity utility infrastructure could reach $1.5 trillion, and nearly $277 billion dollars will need to be spent to support our aging water distribution system. While congress has effectively killed the President's total plan, both sides of the aisle agree that our nation's infrastructure needs help and the majority of the construction proposals could see the light of day in any new legislation. (For related reading on Ginnie Mae, see What Is A Ginnie Mae Security?)

Globally forward-thinking investors may not need the U.S. to act in order to profit from infrastructure. CIBC World Markets estimates total infrastructure spending over the next 20 years will need to reach nearly $35 trillion and many governments around the world are already spending major amounts. The World Bank's Private Participation In Infrastructure Database reports more than 4,300 different projects currently underway in low-to middle-income nations across the globe. For example, Nigeria has begun construction on a multi-billion-dollar Trans-Sahara gas pipeline and Chile has begun expansion of its Metro Santiago underground rail system. This spending will only accelerate as the emerging world begins its transition to the modern one.

Buying the Long-Term Trend
For investors, the trend of infrastructure improvements, both here and abroad makes a great long-term portfolio addition. Those firms who do the physical construction make an ideal way to play this build-out. Both the PowerShares Emerging Markets Infrastructure (NYSE:PXR) and the First Trust ISE Global Engineering & Construction (NYSE:FLM) offer broad exposure to the companies that are involved in the heavy lifting. The PowerShares fund also includes a heavy dose of the materials companies that provide the steel and aggregate needed for construction.

Tutor Perini (NYSE:TPC) could be an undervalued infrastructure pick. The firm provides construction and engineering services to a variety of global civil and public clients. Tutor currently has a current backlog of projects worth nearly $5 billion and has a low debt-to-cash ratio. Shares of the firm have dropped heavily in the recent global sell-off and trade at a forward 6. Like Tutor, both Sterling Construction (Nasdaq:STRL) and Chicago Bridge & Iron Company (NYSE:CBI) represent undervalued engineering plays.

Port infrastructure and maintenance tends to be one are that investors ignore when thinking about heavy construction. Both Great Lakes Dredge & Dock Corporation (Nasdaq:GLDD) and Orion Marine Group (NYSE:ORN) have sold off heavily as investors fear that decreases in Army Corp of Engineer spending will affect these firms. However, both firms now offer bargains as Great Lakes has been expanding internationally and Orion is benefiting from upgrades in the Gulf of Mexico. (For related reading, see Will Obama's Plan Boost Infrastructure Names?)

The Bottom Line
The Presidents recent proposals for increased infrastructure spending underscore the global phenomenon. Many governments are plowing large dollar amounts into upgrading and improving these vital pieces of economic growth. The previous heavy construction firms, along with Granite Construction (NYSE:GVA), make ideal plays on the theme.

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Related Articles
  1. Mutual Funds & ETFs

    The Top 5 Large Cap Core ETFs for 2016 (VUG, SPLV)

    Look out for these five ETFs in 2016, and learn why investors should closely watch how the Federal Reserve moves heading into the new year.
  2. Economics

    India: Why it Might Pay to Be Bullish Right Now

    Many investors are bullish on India for all the right reasons. Does it present an investing opportunity?
  3. Stock Analysis

    Analyzing Altria's Return on Equity (ROE) (MO)

    Learn about Altria Group's return on equity (ROE) and analyze net profit margin, asset turnover and financial leverage to determine what is causing its high ROE.
  4. Investing Basics

    Building My Portfolio with BlackRock ETFs and Mutual Funds (ITOT, IXUS)

    Find out how to construct the ideal investment portfolio utilizing BlackRock's tools, resources and its popular low-cost exchange-traded funds (ETFs).
  5. Investing News

    Icahn's Bet on Cheniere Energy: Should You Follow?

    Investing legend Carl Icahn continues to lose money on Cheniere Energy, but he's increasing his stake. Should you follow his lead?
  6. Stock Analysis

    Analyzing Google's Return on Equity (ROE) (GOOGL)

    Learn about Alphabet's return on equity. How has its ROE changed over time, how does it compare to its peers and what factors are driving ROE for the company?
  7. Investing News

    Is Buffett's Bet on Oil Right for You? (XOM, PSX)

    Oil stocks are getting trounced, but Warren Buffett still likes one of them. Should you follow the leader?
  8. Investing

    3 Things About International Investing and Currency

    As world monetary policy continues to diverge rocking bottom on interest rates while the Fed raises them, expect currencies to continue their bumpy ride.
  9. Investing News

    Chipotle Served with Criminal Probe

    Chipotle's beat muted expectations and got a clear bill from the CDC, but it now appears that an investigation into its E.coli breakout has expanded.
  10. Stock Analysis

    Analyzing Sprint Corp's Return on Equity (ROE) (S)

    Learn about Sprint's return on equity. Find out why its ROE is negative and how asset turnover and financial leverage impact ROE relative to Sprint's peers.
RELATED FAQS
  1. Should mutual funds be subject to more regulation?

    Mutual funds, when compared to other types of pooled investments such as hedge funds, have very strict regulations. In fact, ... Read Full Answer >>
  2. Do ETFs pay capital gains?

    Exchange-traded funds (ETFs) can generate capital gains that are transferred to shareholders, typically once a year, triggering ... Read Full Answer >>
  3. How do real estate hedge funds work?

    A hedge fund is a type of investment vehicle and business structure that aggregates capital from multiple investors and invests ... Read Full Answer >>
  4. Are Vanguard ETFs commission-free?

    While some Vanguard exchange-traded funds (ETFs) are available commission-free from third-party brokers, a large portion ... Read Full Answer >>
  5. Do Vanguard ETFs require a minimum investment?

    Vanguard completely waives any U.S. dollar minimum amounts to buy its exchange-traded funds (ETFs), and the minimum ETF investment ... Read Full Answer >>
  6. Can mutual fund expense ratios be negative?

    Mutual fund expense ratios cannot be negative. An expense ratio is the sum total of all fees charged by an asset management ... Read Full Answer >>
COMPANIES IN THIS ARTICLE
Trading Center