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From a timing perspective, the concept of the best infrastructure stocks to buy now may not be appealing. Admittedly, with the major equity indices suffering a steep decline during the Sept. 13 session, the instinct for many was to seek cover. Nevertheless, for forward-looking investors, the red ink may provide a discounted opportunity.
Fundamentally, betting against the U.S. economic machine has never been a wise idea. Though other regions have enjoyed significant bull market cycles, the U.S. stands alone as a superpower. Owning the world’s reserve currency and the greatest military force empowers a magnitude of hegemony that other countries can’t match. That’s the broad-view cynical argument bolstering this selection of the best infrastructure stocks to buy now.
More to level ground, the Biden administration seeks to drive economic activity following the devastation of the Covid-19 pandemic. In November 2021, President Joe Biden signed the Infrastructure Investment and Jobs Act. This legislation provides “$550 billion of new federal investments over five years, touching everything from bridges and roads to the nation’s public transit, broadband, water and energy systems,” according to CNN.
Still, this segment does present risks so it’s important to be prepared. If that’s you, here are the best infrastructure stocks to buy now.
Vulcan Materials (VMC)
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Though one of the most popular names among the best infrastructure stocks to buy, Vulcan Materials (NYSE:VMC) presents steep risks. As the latest inflation report demonstrated, higher prices didn’t limit themselves to just fuel costs. With Vulcan dependent on commodity costs to promote its infrastructure-building business, inflation imposes challenges.
For instance, in the company’s latest financial disclosure for the second quarter of 2022, revenue increased by nearly 44%. However, its gross margin slipped to 22.8% from 29.27% in the year-ago period. Not surprisingly, then, net income dipped to $187 million from $195 million.
With the Federal Reserve likely to get aggressively hawkish with its monetary policy, commodity costs will likely come down. Of course, economic activity may slow, which would present another problem for VMC.
Ultimately, though, if you believe that the Fed can engineer a soft landing without sparking a recession, Vulcan may be an idea to consider among the best infrastructure stocks to buy from implied lower commodity costs.
Caterpillar (CAT)
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While industrial equipment manufacturer Caterpillar (NYSE:CAT) so far outperforms the benchmark S&P 500 index since the beginning of this year, the company has seen better days. From the January opener, CAT stock slipped nearly 11%. The market rout on Sept. 13 didn’t help, where it dropped over 4% on the day. Nevertheless, CAT may be one of the best infrastructure stocks to buy for long-term contrarian investors.
Currently, many on Wall Street are freaking out over broader economic implications. If you consider the sector heatmap for the year so far, industrial-related segments have suffered disproportionately compared to other market categories. Effectively, higher commodity prices and fuel costs impeded business progression. And that has a negative downwind effect on companies like Caterpillar.
However, according to TipRanks, the heavy equipment manufacturer maintains a “buy” consensus among covering analysts. Among 13 ratings, eight of them feature a “buy,” while four are “holds” and one rates CAT a “sell.” Moving forward, it’s likely that these analysts anticipate the Fed can engineer a soft landing.
American Tower (AMT)
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If you’re looking for the best infrastructure stocks to buy without the caveats about soft landings, you may want to focus on American Tower (NYSE:AMT). A real estate investment trust (or REIT), American Tower is an owner and operator of wireless and broadcast communications infrastructure in several countries worldwide.
According to its website, its global portfolio includes “approximately 222,000 communications sites, including more than 43,000 properties in the United States and Canada and approximately 179,000 properties internationally.” It’s important to establish this backdrop because AMT represents a business that remains powerfully relevant irrespective of economic conditions.
While Covid-19 imposed much devastation globally, the World Bank notes that the crisis also reinforced the need for connectivity. Therefore, you can debate which smartphone or device is the best. None of the popular products will go anywhere without communication networks. Therefore, AMT is a clear winner among the best infrastructure stocks to buy.
Xylem (XYL)
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While not exactly the purest play idea among the best infrastructure stocks to buy, Xylem (NYSE:XYL) nevertheless embodies vital importance. A water technology provider, Xylem delivers products and services for public utility, residential, commercial, agricultural and industrial settings. Moreover, Xylem is a global juggernaut, doing business in more than 150 countries.
Fundamentally, the company provides unparalleled value to human societies because it facilitates water flow efficiencies and management. According to the World Wildlife Fund (WWF):
Some 1.1 billion people worldwide lack access to water, and a total of 2.7 billion find water scarce for at least one month of the year. Inadequate sanitation is also a problem for 2.4 billion people—they are exposed to diseases, such as cholera and typhoid fever, and other water-borne illnesses.
Moving forward, water management is virtually guaranteed to be a top priority. Therefore, XLY will likely rise in relevance.
Interestingly, Wall Street analysts apparently feel the same. According to TipRanks, XYL carries a “moderate buy” consensus rating.
Brookfield Renewable Partners (BEP)
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Billed as an operator of one of the world’s largest publicly traded, pure-play renewable power platforms, Brookfield Renewable Partners (NYSE:BEP) aligns with wider political and ideological sentiments. Particularly, with climate change becoming a hot-button issue, societies must implement diversified energy infrastructures. That way, a zero-emissions future becomes much more credible.
Coincidentally, BEP is one of the best infrastructure stocks to buy and not just on a forward-looking narrative basis. Since the beginning of this year, BEP gained a little over 5%. Though hardly a figure to write home about, contextually, Brookfield Renewable is well above the benchmark S&P 500. The index is down 18% during the aforementioned period.
Cynically, Brookfield may benefit from geopolitical flashpoints. Due to Russia’s invasion of Ukraine, many European leaders looked to fast-track their renewable energy initiatives. Whether from a scientific perspective or a strategic one, BEP rides a relevant business trajectory.
Finally, according to TipRanks, the consensus rating for BEP is a “moderate buy”.
United Rentals (URI)
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Drilling into the more speculative section among the best infrastructure stocks to buy, United Rentals (NYSE:URI) initially presents a less-than-favorable profile. For one thing, URI stock is down about 11% since the start of the year. However, it doesn’t pay a dividend, unlike many of the established infrastructure companies.
Still, United Rentals could provide an interesting hedge, depending on how economic circumstances play out. Because of hot inflation, the Fed must navigate its countervailing monetary policy carefully. Go too aggressive with raising rates and the economy could unravel disastrously. Not wanting to do that, the central bank may act somewhat conservatively.
That would imply a greater inflation risk than the market currently prices in. Because United Rentals specializes in industrial and construction equipment rentals, it offers contractors the ability to get the equipment they need without shelling over big bucks for asset purchases. Even under deflationary circumstances, the broader economic ambiguities may push contractors to seek rentals over hefty purchase commitments.
ChargePoint (CHPT)
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One of the tough calls to make in my opinion, ChargePoint (NYSE:CHPT) nevertheless attracts attention as being among the best infrastructure stocks to buy. Fundamentally, ChargePoint benefits from the adage: electric vehicles are the future. Indeed, with sales of EVs rising — especially with fuel costs soaring — CHPT seems like a great bet.
According to the American Housing Survey, 63% of occupied housing units feature a garage or carport. As I’ve said many times before, that leaves millions of people without access to home charging. Therefore, the development of public infrastructure will be vital to broader EV integration. It just comes down to simple math, a calculation that may ultimately benefit CHPT.
However, the challenge stems from economic considerations. According to Kelley Blue Book, the average price of a new EV stands at nearly $63,000. It could be even more right now, making broader EV integration incredibly challenging.
Still, per TipRanks, CHPT features a “strong buy” consensus rating.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.
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