The best way to profit from the rebuilding of America

The federal government is ready to pour hundreds of billions of dollars into this often overlooked but urgently needed infrastructure fix.

By StreetAuthority Aug 9, 2013 5:59PM
Downtown Minneapolis skyline & Mississippi River © Chris Andersen Photography, Flickr, Getty ImagesBy David Goodboy

I have a friend who suffers from a peculiar phobia. It's so bad that her fear keeps her from driving many places.

She will drive a hundred miles in the wrong direction to avoid coming face-to-face with the cause of her fear, a cause that many drivers face on a daily basis. Her fear can be hard on her social life, because she's unwilling to drive to many activities outside her neighborhood.

Believe it or not, my friend has a high-powered corporate job and is very successful, despite her unusual phobia. For a long time, I saw her fear as irrational -- but after doing some research for this article, I am starting to understand it, irrational as it may seem to me.

Not only does my friend's fear make some sense, it has led to my discovery of a trillion-dollar investment opportunity.

My friend's fear is known as gephyrophobia: the fear of bridges. My friend, who has no fear of flying or other irrational worries, is deathly afraid of driving across any bridge because of the possibility it may collapse.

Before researching this article, I was under the impression that bridges never collapse. Boy, was I wrong! According to Barry LePatner, author of "Too Big To Fall," there have been 600 bridge failures in the United States since 1989. 

There are about 18,000 "fracture-critical" bridges -- those with characteristics that make them especially susceptible to collapse -- in the U.S. that were built between the 1950s and the late '70s as part of the interstate highway system. In addition, there are more than 66,000 structurally deficient bridges and nearly 85,000 functionally obsolete bridges in the U.S. and Puerto Rico.

These numbers not only told me that my friend's fear has some basis in fact, they alerted me to the sorry state of the infrastructure of the United States. Infrastructure refers to bridges, roads, and other physical structures required for the smooth functioning of society. Consulting group McKinsey Global Institute estimates the United States has a 1% shortfall in infrastructure spending compared with its GDP.


One percent may not sound like much, but it works out to $160 billion per year. McKinsey estimated the cost of a five-year project to rebuild U.S. infrastructure at about $1 trillion. 

President Barack Obama has a plan to deal with the U.S. infrastructure problem. This plan consists of a set of proposals to generate money for the massive construction projects by using tax breaks and loans to stimulate private investment. 

While we are still a long way from addressing all the infrastructure issues, Obama has made some progress. The most recent annual infrastructure report card from the American Society of Civil Engineers recently upgraded U.S. infrastructure from a D to a D-plus. The organization gave credit to Obama's plan to increase private investment for the improvement.

One of the smartest ways in which investors can profit from the rebuilding of America is with infrastructure mutual funds. The most important thing to know is that, although these funds are increasing their assets, they haven't caught on yet with the investing public.

According to Morningstar, the 12 mutual funds with infrastructure as their focus have attracted just over $1 billion this year through April 30. Compared this amount with just under $750 million in all of 2012 and over $365 million in 2011, you can clearly see the dramatic capital inflow increase. 

It's just not the United States that needs infrastructure improvement. My favorite investment in the infrastructure arena is the DWS RREEF Global Infrastructure Fund (TOLSX). This fund requires a minimum investment of $2,500 and ranks as low risk, high return relative to its category. As you can see from this Morningstar chart, TOLSX has outperformed the benchmarks since 2009. 

The fund boasts over $2 billion in assets invested in about 43% U.S. based infrastructure stocks and around 55% in non U.S. based infrastructure stocks. I like this mix, as the fund stands to continue to benefit from the Obama-sparked infrastructure improvement projects in the U.S. -- while internationally hedged against potential U.S. political and economic issues. The fund's top holdings:

TOLSX has returned over 7% this year. Its best quarter to date was a stellar 17%-plus return during the third quarter of 2010. 

Risks to consider:
This fund is considered low-risk, so the primary risk factor is stock market fluctuations. In addition, concentration in the infrastructure sector may cause losses due to global economic slowdowns and political risks. The fund also has a turnover rate of more than 170%. This active trading poses the risk of higher fees and costs passed along to the investor.

Action to take:
As you can see on the chart, the price has fallen into my value buy zone. I like this fund right now with a 12-month price target of $15. 


David Goodboy does not personally hold positions in any securities mentioned in this article.
StreetAuthority LLC does not hold positions in any securities mentioned in this article.


More from StreetAuthority
18Comments
Aug 11, 2013 9:50PM
avatar
I agree that the U.S. infrastructure needs attention.  However, Obama blew his golden opportunity to address the infrastructure problem when he pi$$ed away 700B in the 2009 Stimulus Plan.  He spoke of shovel-ready projects ... but we are hard-pressed to identify any that were addressed.  If he had put his (i.e. our) money where his mouth was in 2009, we would be well on the way to addressing this problem.  Unfortunately, too many political paybacks got in the way.  We would be fools to authorize more funds to "presumably" address the problem now.  He had his chance and he blew it.
Aug 10, 2013 9:07AM
avatar

You have lots of time....  No need to do anything, nothing will begin until the socialist Obama is  gone in 3.5 years.   So hunker down, conserve cash, reduce costs, and don't add to payrolls. 

 

In 3.5 years, the imbecile Obama's war on business and the middle class will end.  Until then, we will just have to endure 'the private  sector is doing fine'...

Aug 10, 2013 2:58PM
avatar
Your fund choice is fine by itself. I own 2 closed end similars. But it's  essentially a global utilities/telecom support fund, largest holdings considered. "Infrastructure" has 2 meanings, the start of article one of bridge/electrical power/highway building of the late 19th and early-mid-20th centuries to bring civilization to the untamed wilderness; and the  current-time operating of utilities and similar for consumers. First cyclical hi-risk, 2d low-risk.  Different investment theses.
Aug 10, 2013 4:16PM
avatar

We have long since positioned ourselves, for Infrastructure rebuilds, it hasn't really happened to any magnitude; But it should, and much more of it is up to Congress.

Maybe if we end a couple Wars completely...

 

We can "beat our Swords into Plowshares."

Aug 11, 2013 1:07PM
avatar
Boy... this is a bunch of BS. The "rebuilding" of America isn't going to have street or bridge work, it's going to geographically align us so we can eliminate gas and oil reliance, concentrate employment where people can easily get to and dedicate arteries strictly for logistics while balancing our resource management. It's already on the drawing board. Sprawl, Gas and Oil are 20th Century cancers the Next Generation of adults aren't even getting driver's licenses for. They don't want cars. I don't want cars either... I'd like to do something else with all that cash they drain from my budget. I also don't see value in reviving functionally obsolete housing when we can incorporate renewable resources that reduce our overall need for power plants. DIE ALREADY 20TH CENTURY MORONS... your days are behind us. Move on and progress.
Aug 10, 2013 2:16PM
avatar
Gee raise infrastructure spending $160 billion a year. Ok, how do we pay for it? Oh, let's stop spending the $400-500 billion a year on the Christian Crusades MMXXIV and cut off all aid to the Middle East including Israel. Of course then all those employed in the defense warfare socialistic establishment will be SOL. On way or the other everybody in the US is now taking a handout from the Federal Reserve.
Aug 10, 2013 10:54AM
avatar

Mirage Guy:What war are you talking about?It was Bush that started 2 endless wars

and drove the stock market down and down.Obama has cropped up the economy.You

need to pull your head out of your butt.I used to vote a straight Republican ticket until

George"The loser"Bush put us in the trash can.Obama has turned the economy around.

Wake up !

Aug 10, 2013 2:35PM
avatar

RE TOG:I agree 100%.We need a Teddy Roosevelt.There`s none out there.A conservative

would conserve natural resourses,conserve the military,conserve the budget.Obama didn`t

get a silver plater handed to him.He was handed a pile of crap by Bush2.We were on the

brink of a depression with two endless,unfunded wars.When the other Republicans supported

that war criminal I dropped the GOP.My life and finances have never been better.

Aug 10, 2013 1:20PM
avatar

"Dyed in the Wool", Republicans cannot admit to the TRUTH..

 

They have become disenfranchised from the World and worldly knowledge.

A "small percentage" of them have became blinded by un-founded hatred.

 

By the same token they are driving myself away, because of their ignorance.

Report
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
Categories
100 character limit
Are you sure you want to delete this comment?

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

STOCK SCOUTER

StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

133
133 rated 1
286
286 rated 2
441
441 rated 3
737
737 rated 4
614
614 rated 5
606
606 rated 6
621
621 rated 7
441
441 rated 8
317
317 rated 9
122
122 rated 10
12345678910

Top Picks

SYMBOLNAMERATING
BBBYBED BATH & BEYOND INC10
TWXTIME WARNER Inc10
COPCONOCOPHILLIPS9
HDHOME DEPOT Inc9
VZVERIZON COMMUNICATIONS9
More

VIDEO ON MSN MONEY

ABOUT

Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.