Infrastructure involves the tangible, fundamental, and often interconnected systems that are essential to run the economy of a nation. Typical examples of infrastructure include projects for building and operating roads, rails and airports, communication systems, utilities like water and electricity supply, and sewage systems. Such basic components, which often work in an interrelated manner, are essential to support a sustainable social life and business environment necessary for a region’s economy to function and prosper.
Several companies work on designing, developing, operating, and running the infrastructure of a city, state, nation, or region, and qualify to be called infrastructure companies. At times, the infrastructure project size may be enormous, which may require several leading companies to form a consortium to complete a project. Projects related to infrastructure development and improvements may be funded publicly, privately, or through public-private partnerships.
Leading infrastructure sector-specific market indices include the S&P Global Infrastructure Index, which comprises 75 global infrastructure companies covering sectors of energy, transportation, and utilities. Starting 2019 at a value of around 2,283.62 and closing at 2,788.69, it grew by 22% during the year. Another popular infrastructure index - the NYSE FactSet U.S. Infrastructure Index - which tracks only the U.S. based infrastructure companies, grew by around 19% during 2019.
This article looks at the top four infrastructure companies by comparing their performance against that of the sector-specific benchmark index. The list comprises of infrastructure sector stocks that have a market cap of at least $1 billion, and have performed better than the above-mentioned indices. The list is presented in descending order of the top-performing stocks based on the percentage gains realized between Jan. 7, 2019 and Jan. 3, 2020.
List of Top 4 Infrastructure Stocks of 2019
Tetra Tech Inc (TTEK)
Market Cap: $4.8 billion Performance: 71.8%
Tetra Tech Inc is a California based infrastructure firm that focuses on consulting and engineering services. It provides assistance in the areas of construction, science, research, engineering, and information technology.
Tetra Tech was founded in 1966 with the focus of providing engineering services to coastal areas. It has won numerous awards throughout its history, including top accolades as an electrical design firm, consulting and engineering practices in offshore wind, and an environmental business achievement award.
Most recently the U.S. Army has selected Tetra Tech in a joint venture with AECOM for a $90 million contract to support Saudi Arabia's missile program.
Martin Marietta Materials Inc (MLM)
Market Cap: $17.24 billion Performance: 54% annual return
Martin Marietta Materials Inc, founded in 1993, is a company based in North Carolina that supplies building materials, which include concrete, asphalt, and cement. These are the types of materials used for roads and sidewalks. Martin Marietta operates in 27 states, Canada, and the Bahamas.
Market Cap: $6.7 billion Performance: 51.5%
AECOM is based out of California and was founded in 1990. They are an engineering firm that provides a multitude of services, some of which include construction, engineering, environmental solutions, planning and consulting, IT & cybersecurity, and architecture and design. Their projects cover transportation, water, governments, energy, and the environment.
They have won numerous accolades, including Fortune magazine's "World's Most Admired Companies" for five consecutive years.
Recently, AECOM was awarded a $520 million year contract to provide operations and maintenance services to the U.S. Army. Late last year AECOM announced the sale of its Management Services business for a price of $2.4 billion, which is expected to close in 2020. And mentioned above with Tetra Tech, they will be part of a $90 million joint venture to support Saudi Arabia's missile program.
Nextera Energy Inc (NEE)
Market Cap: $117.5 billion Performance: 39.5% annual return
The Juno Beach, Florida-based Nextera Energy was incorporated in 1984 and figures among the top electrical utility companies of America. It generates renewable energy from wind, solar and nuclear sources, and is considered to be the first in the sector to recognize the potential of renewable energy. Serving both retail and wholesale customers, it owns and operates generation, transmission and distribution facilities to support energy associated services, provides power-linked risk management services, and has investments in gas infrastructure assets.
Price Performance of Infrastructure Sector Stocks
Graph Courtesy: Yahoo! Finance
Infrastructure Sector Wrap-up
Given the diversified nature of operating models, business activities, and operations of infrastructure sector companies, a wide variety is available to investors looking to benefit from sector-specific investments.
Infrastructure stocks are considered suitable investments over the long-term. The performance of infrastructure stocks depends on the economic cycle prevailing in a nation or region, and they make moves based on macroeconomic indicators like GDP growth and geopolitical developments. Such stocks may not show short-term high volatility, and their returns (or losses) are realized over a longer period of time.