As infrastructure improvements across the globe continue to gain steam in a variety of nations, the opportunities for the private sector continues to grow. Investors have already, flocked to funds like Brookfield Global Listed Infrastructure (NYSE:INF) and First Trust NASDAQ Clean Edge SM (Nasdaq:GRID) in spades, as a way to play the theme. However, the majority of funds in the sector either focus on the owner, or operators, of infrastructure assets or the companies that do the heavy lifting. With the theme covering a wide variety of topics, there are plenty of ways for investors to profit from the boom. One such, often ignored, sub-sector offers a rock-solid bet on the great build-out.

Investopedia Markets: Explore the best one-stop source for financial news, quotes and insights.

Big Money in Crushed Rock
Despite its boring nature, one of the best ways to play the global infrastructure build-out could be the aggregate and materials sector. These bits of crushed limestone, gravel and sand are vital components in a variety of projects. New bridges, concrete structures, road ways and water treatment facilities all require massive amounts of these materials. As the building boom has taken shape over the last few years, the market for these aggregates has grown by 7.26% annually. Many analysts predict that the trend will continue as emerging nations undergo their initial build-outs, and the developed world begins rebuilding dilapidated structures. Researchers at Freedonia estimate that worldwide demand for these materials will expand by 2.9% annually, and global cement demand will rise 4.1% annually through 2013. A report by World Market Intelligence highlights similar predictions with the value of construction aggregates consumed globally, growing at a compound annual growth rate of 10.68% through 2015. Both research groups report that the Asia-Pacific region will be the real driver for this increased demand, as spending for building construction in the region will outpace the rest of the world. (For additional reading on infrastructure assets, check out Build Your Portfolio With Infrastructure Investments.)

With growth prospects aside, investors may be interested in the sector as a value play. The recent market rout and threat of a new recession, in the developed world, has sent stocks in the sector downwards. The proxy for the overall materials sector, the Materials Select Sector SPDR (ARCA:XLB) can be had for a price-earnings ratio of 10. Private construction contracts shrank over the last few months as demand for new shopping malls, office buildings and other commercial buildings have fallen. However, recent pledges by President Obama and House Republicans to seek funds for supporting highway and infrastructure programs, and the global build-out still occurring rapidly, the sector is a long-term value.

Adding Those Aggregates
For investors, the construction aggregate sector could be an interesting bet on the growth in infrastructure spending. While many of the major basic material exchange-traded funds (ETFs) like Vanguard Materials ETF (ARCA:VAW) include a hefty dose of the aggregate producers, there isn't a pure sector fund yet. However, there are plenty of ways to add exposure. (For more on how ETFs are built, read An Inside Look At ETF Construction.)

For those looking at beaten down stocks, Vulcan Materials (NYSE:VMC) could be worth a look. The company is the largest producer of aggregates in the U.S. with 172 stone quarries, 43 sand and gravel plants, 81 sales yards, 37 asphalt plants and 118 ready-mixed concrete facilities. The company drastically cut its dividend in the last quarter, which will save the firm $124 million per year, and could be a great overall move for long-term investors. Similarly, both Martin Marietta Materials (NYSE:MLM) and Texas Industries (NYSE:TXI) have traded downwards in sympathy.

While demand is still far from peak levels, recent data suggests the cement industry could be ready for a rebound. Suffering from the dual curse of being an Irish firm and being a cyclical construction stock, somehow CRH (NYSE:CRH) manages to be a global cement powerhouse that currently yields 2%. In addition, CEMEX (NYSE:CX) finally reported a good quarter and better than expected earnings, but still remains a bargain at its current price.

The Bottom Line
As the infrastructure boom continues to spread worldwide, the construction aggregate firms are poised to profit. Demand for these essential building blocks has grown exponentially over the last few years, and will continue to do so in the near future. The previous firms along with United States Lime & Minerals, (Nasdaq:USLM) make ideal selections to play the recovery.

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

At the time of writing, Aaron Levitt did not own shares in any of the companies mentioned in this article.

Related Articles
  1. Chart Advisor

    Watch This ETF For Signs Of A Reversal (BCX)

    Trying to determine if the commodity markets are ready for a bounce? Take a look at the analysis of this ETF to find out if now is the time to buy.
  2. Investing News

    What You Can Learn from Carl Icahn's Mistakes

    Carl Icahn has been a stellar performer in the investment world for decades, but following his lead these days could be dangerous.
  3. Mutual Funds & ETFs

    ETFs Can Be Safe Investments, If Used Correctly

    Learn about how ETFs can be a safe investment option if you know which funds to choose, including the basics of both indexed and leveraged ETFs.
  4. 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.
  5. 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?
  6. 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.
  7. 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).
  8. Fundamental Analysis

    4 Predictions for Oil in 2016

    Learn four predictions for oil markets in 2016 including where prices are heading and the key fundamental factors driving the market.
  9. 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?
  10. 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?
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