Harry and I are definitely on the same page when it comes to investing in infrastructure assets and securities – we love them.
Spending on infrastructure, especially in a low-growth, ultra-low interest rate environment, just makes good sense. For one thing, good infrastructure provides a stable foundation for economic growth. Countries that underinvest in infrastructure claim they’re saving money, but in reality they’re choking off future growth.
What’s more, it’s possible for governments, and the private companies with which they contract, to earn positive rates of return on infrastructure investments. Toll roads, for example, provide streams of income that work to pay back initial investments.
The same cannot be said for all government spending, as is the case with many social programs.
Here’s a chart of one infrastructure fund. I’ve intentionally left the fund unnamed… you’ll need to subscribe to Boom & Bust to gain access to our model portfolio. In which, by the way, we’re closing out the year with 12 of our 15 positions in profit territory. Five of these are double-digit winners!
You’ll see this infrastructure investment has been in a steady uptrend since 2009. Recently, amidst the early fall equities sell-off, this security pulled back a bit. In fact, its price pulled into the sweet spot of the Fibonacci “Buy Zone,” giving investors a chance to get in at a good price.
Last month, I highlighted the differences between infrastructure funds in developed nations versus emerging markets. Basically, in bullish risk-on environments, emerging market infrastructure plays will outperform. But outperformance will come at the potential expense of increased volatility.
This particular investment has infrastructure assets in both types of economies – fully developed nations and fast-growing emerging markets. That shields this security from the volatility of emerging market investment, while still giving it the upside potential inherent in their above-average growth rates.
No matter how we look at it, infrastructure investments are going to play a key role in the global economy this coming year.
If you haven’t done so already read the Survive & Prosper issue on “What a Fiscally Responsible Stimulus Program Looks Like.“