Best infrastructure stocks to watch
Discover the top infrastructure stocks that could benefit from increased government spending and private investment in 2024 and beyond.
Best infrastructure stocks to watch
Infrastructure investment is gaining momentum globally, with governments and private sectors allocating significant funds to upgrade and expand critical systems. This surge in spending presents potential opportunities for investors looking to capitalise on the infrastructure boom.
Heading: Why invest in infrastructure stocks?
Infrastructure stocks can offer investors exposure to companies involved in building and maintaining essential public works. These include roads, bridges, railways, airports, and utilities. The sector often benefits from government spending initiatives and long-term contracts, potentially providing stable returns.
Investing in infrastructure can also serve as a hedge against inflation. As the costs of materials and labour rise, infrastructure companies can often pass these increases on to their customers, helping to maintain profit margins.
Furthermore, infrastructure investments tend to have a low correlation with other asset classes. This characteristic can help diversify an investment portfolio, potentially reducing overall risk.
Lastly, the growing focus on sustainable development and climate resilience is driving demand for green infrastructure projects. This trend could create new opportunities for companies specialising in renewable energy and eco-friendly construction methods.
Top infrastructure stocks to consider
While past performance doesn't guarantee future results, several infrastructure stocks have shown promise and could be worth watching. Here are some companies that analysts are keeping an eye on:
Caterpillar Inc: A global leader in construction and mining equipment, Caterpillar is well-positioned to benefit from increased infrastructure spending.
Caterpillar TipRanks Smart Score and analyst rating.
Caterpillar has a Smart Score of ‘9 Outperform’ but is rated as a ‘hold’ by analysts with 5 ’buy’ and 7 ‘hold’ and 2 ‘sell’ (as of 09/10/2024).
According to LSEG Data & Analytics, analysts rate the Caterpillar share as a ‘hold’ with 5 ‘strong buy’, 4 ‘buy’, 14 ‘hold’, 2 ‘sell’ and 1 ‘strong sell’ (as of 09/10/2024).
Vinci SA: This French construction company has a diverse portfolio of projects across Europe and beyond, including airports, highways, and renewable energy facilities.
Vinci analyst rating
According to LSEG Data & Analytics, the Vinci share is rated as a ‘buy’ with 8 ‘strong buy’, 12 ‘buy’, 3 ‘hold’ and 1 ‘sell’ (as of 09/10/2024).
Eiffage SA: Another major French infrastructure firm, Eiffage has a strong presence in construction, real estate, and concessions management.
Eiffage: A global leader in construction and mining equipment, Caterpillar is well-positioned to benefit from increased infrastructure spending.
Eiffage analyst rating
LSEG Data & Analytics shows that analysts rate the Eiffage share as a ‘buy’ with 6 ‘strong buy’, 8 ‘buy’ and 3 ‘hold’ (as of 09/10/2024).
Ashtead Group PLC: This equipment rental company serves various industries, including construction and industrial sectors, and could see increased demand as infrastructure projects ramp up.
Ashtead TipRanks Smart Score and analyst rating
Ashtead has a Smart Score of ‘8 Outperform’ and is rated as a ‘strong buy’ by analysts with 6 ’buy’ and 2 ‘hold’ (as of 09/10/2024).
According to LSEG Data & Analytics, analysts rate the Ashtead share as a ‘buy’ with 5 ‘strong buy’, 11 ‘buy’, 5 ‘hold’ and 1 ‘sell’ (as of 09/10/2024).
Infrastructure-focused ETFs for diversification
For investors seeking broader exposure to the infrastructure sector, exchange-traded funds (ETFs) can offer a diversified approach. Some popular infrastructure ETFs include:
- iShares Global Infrastructure ETF: This fund provides exposure to a range of global infrastructure companies across multiple sectors.
- SPDR S&P Global Infrastructure ETF: Focused on companies involved in the development and maintenance of infrastructure projects worldwide.
- First Trust NASDAQ Clean Edge Smart Grid Infrastructure Index Fund: This ETF targets companies involved in the modernisation of electrical power grids.
- Global X U.S. Infrastructure Development ETF: Concentrates on US-based companies that could benefit from domestic infrastructure spending.
Risks and challenges in infrastructure investing
While infrastructure stocks can offer attractive opportunities, investors should be aware of potential risks. Government policy changes or budget cuts can significantly impact infrastructure spending, affecting company revenues.
Economic downturns can also lead to project delays or cancellations, potentially hurting infrastructure firms' profitability. Additionally, large-scale projects often face regulatory hurdles and environmental concerns, which can cause delays and increase costs.
Competition in the sector is intense, with many companies vying for lucrative contracts. This competition can pressure profit margins and make it challenging for smaller firms to compete with industry giants.
Future trends in infrastructure investment
Looking ahead, several trends are likely to shape the infrastructure sector. The push for sustainable and resilient infrastructure is gaining momentum, driven by climate change concerns and environmental regulations.
Digital infrastructure, including 5G networks and data centres, is becoming increasingly important as societies become more connected. Companies specialising in these areas could see significant growth opportunities.
The rise of smart cities and the Internet of Things (IoT) is also driving demand for innovative infrastructure solutions. Firms that can integrate technology into traditional infrastructure projects may have a competitive advantage.
Lastly, the need for infrastructure upgrades in emerging markets presents significant opportunities for global infrastructure companies willing to expand into these regions.
How to invest in infrastructure stocks
If you're considering investing in infrastructure stocks, here's how to get started:
- Do your research on the infrastructure sector and individual companies
- Open a share dealing account (https://www.ig.com/uk/investments/share-dealing) with us
- Search for the infrastructure stock you want to invest in on our platform or app
- Choose the number of shares or amount of money you'd like to invest
- Place your trade
Remember to consider your risk tolerance and investment goals before making any decisions. It's also wise to diversify your portfolio across different sectors and asset classes to manage risk.
By staying informed about global infrastructure trends and carefully selecting investments, you can potentially capitalise on the growing opportunities in this essential sector.
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
Discover how to trade the markets
Explore the range of markets you can trade – and learn how they work – with IG Academy's free ’introducing the financial markets’ course.
