Infrastructure was neglected as government budgets tightened, but could a fresh load of investment turn the outlook around for infrastructure stocks? Discover the infrastructure stocks to watch this year.
Infrastructure outlook 2023
Infrastructure is vital to the global economy, but it’s expensive and governments can’t afford the bill on their own, which is why they rely on private investors and companies to fund projects.
The funding gap between current government spending and budgets required to maintain projects points to large investments in infrastructure over the coming years.
Industry outlooks have estimated that the US alone needs to invest $2.6 trillion to ensure its infrastructure is in a good state of repair – including highways, bridges, airports and various other transport systems. Meanwhile, estimates by Swiss RE have the world infrastructure budget at around $80 trillion to expand projects through to 2040.
In the US, for example, President Joe Biden has signed an infrastructure bill into law now – the original bill was set to be worth $2.25 trillion, but the watered-down version is still worth $1.2 trillion. It’s expected to focus on surface transportation, drinking water and stormwater systems, and schools.
But it’s not just infrastructure itself that the increased spending will impact. The investment will have a knock-on effect on job growth – and positive job data will spur investment in general because it shows a growing economy.
What are infrastructure stocks?
Infrastructure stocks are the shares of companies that own, operate, build, maintain or expand infrastructure systems. Broadly they’re split into three categories of stock:
- Transportation – the companies that build systems to move people and freight, which include airports, railroads, motorways/highways and ports
- Commodity – the businesses involved in producing, transporting, processing and storing physical commodities, such as gas, petroleum and electricity
- Data – the networks and their components that aid the movement and storage of information, including data centres, towers and cables
However, a huge range of stocks fall into the infrastructure category – including manufacturers of construction equipment, waste disposal firms and software developers who streamline infrastructure projects.
Infrastructure stocks to watch
Here’s a rundown of some of the most popular infrastructure stocks to watch for 2023, ranked by FOREX.com client trade consideration data.*
- Caterpillar (CAT)
- ChargePoint (CHPT)
- Enbridge (ENB)
- Brookfield Infrastructure Partners (BIP)
- Crown Castle (CCI)
*Trade consideration includes both long and short interest. It’s important to do your research into a stock’s recent share price action before taking a position.
The infrastructure stocks to watch will vary depending on your strategy. If you’re looking to invest in these companies, then you’ll want to focus on strong, consistent growth and won’t be interested in the share price fluctuations. But for traders, shorter-term volatility is important.
And due to the ongoing market volatility caused by recessionary fears, infrastructure stocks have taken a beating despite a mainly positive outlook. So, this does create opportunities for both going long and short if you’re willing to put the time in to research the stocks.
Caterpillar Inc is the largest construction and mining equipment manufacturer, with a market capitalisation of $129.92 billion. Its iconic yellow machinery is found on infrastructure and building sites across the globe.
Despite its reputation, Caterpillar stock stayed trading in a range as construction projects started to dwindle in the late 2010s. But since 2020, when a lot of shares took a hit amid the pandemic, investors started to realise construction spending would be essential for economic recovery. The optimism around the sector put shares of CAT up nearly 162% between March 2020 and February 2023.
For the most part, CAT is a US infrastructure stock, but it has operations in 180 markets – many of which are classified as emerging – which gives the company more diversified revenue streams.
ChargePoint Holdings is the largest electric vehicle charging station provider in the US.
The company installs chargers across various locations – such as retailers, businesses, apartment buildings, and other public locations – and also delivers chargers to homeowners. It’s estimated there are over 30,000 public charging points in the US, and over 105 million Home Flex chargers worldwide.
ChargePoint is one of the larger and more popular firms, so it’s positioned to benefit from the expected shift toward EVs. In the US, for example, President Biden has set aside nearly $500 million for building 500,000 electric vehicle charging stations across the country by 2030.
The company’s shares are up 33% so far this year, giving it a market cap of $4.25 billion.
Enbridge is a Canadian crude oil and liquid pipeline system producer. Enbridge has a network of oil and gas pipelines across North America, which it continued to invest in alongside renewable energy projects – such as wind, solar and hydroelectric power.
Enbridge is well-known as a dividend-paying firm given its strong income growth and is still positioned to see an annual cash flow increase of between 5-7% through to 2024. The company currently has a market cap of $82.51 billion.
Brookfield Infrastructure Partners
Brookfield Infrastructure is part of the Brookfield Asset Management (BAM) group – a multinational investment company with over $725 billion in assets under management.
The infrastructure subsidiary of Brookfield holds a diversified global portfolio of infrastructure companies across transport, data, utilities and midstream (movement and storage of commodities).
According to Brookfield’s earnings reports, the infrastructure unit has invested $17.3 billion over the 12 months ending September 30 2022 and the firm’s funds from operations (FFO) hit $2.1 billion.
But despite the company’s solid fundamentals and strong dividend history, its share price fluctuated significantly throughout 2022 driven by negative market sentiment across the board. Its market value is currently $15.70 billion.
Crown Castle is a telecommunication network operator based in Houston, Texas. It operates over 40,000 transmission masts as well as 70,000 small cells for wireless communication and fibre cable networks that are expanding the 5G network across the US.
Crown Castle is classed as an infrastructure real estate investment trust, or REIT, because it leases physical property to tenants – in this case the property is telecommunications assets. The long-term contracts supply the REIT with steady cash flow to provide investors with dividend payments. Crown Castle believes the 5G network expansion will support annual dividend growth of between 7-8%. The company’s shares are currently up 4.3% in the year to date, giving it a market value of $62.82 billion.
There are several infrastructure funds and ETFs that can give you broader exposure to the sector from a single position. Examples include the:
- Sequoia Economic Infrastructure Income Fund
- Global X U.S. Infrastructure Development ETF
- iShares Global Infrastructure ETF
- FlexShares STOXX Global Broad Infrastructure Index Fund