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Philip van Doorn

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Jan. 9, 2018, 3:38 p.m. EST

Infrastructure stocks can be solid investments even if Trump doesn’t get his way

State and local governments around the world are looking to publicly traded companies to build out wireless, water and other infrastructure

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By Philip van Doorn, MarketWatch


Getty Images
We may soon see President Trump wearing a similar hat when he pitches his infrastructure plan.

While President Trump got his way with tax reform, he may not get the infrastructure bill he wants from Congress.

Regardless, investors can profit from companies building wireless communications, providing drinking water and operating airports across the world. Plus, those types of investments would provide stability if the U.S. stock market rally fizzles after nine long years.

A mutual fund that holds a mix of those types of stocks is the Virtus Duff & Phelps Global Infrastructure Fund /zigman2/quotes/207068784/realtime PGIUX -1.55% , overseen by Connie Luecke. /zigman2/quotes/205893366/realtime PGUAX -1.55%

From taxes to infrastructure

The tax-reform legislation that Trump signed into law Dec. 22 will help many companies generate higher profits. Trump is expected to announce his plan for major infrastructure spending as part of his State of the Union speech on Jan. 30. But the Republicans who control Congress may not wish to do more heavy lifting in the name of increased federal spending, after positioning themselves for re-election bids this November based on leaving more money in taxpayers’ pockets.

Luecke expects Trump to face resistance. In an interview on Jan. 4, she said: “Everyone agrees that infrastructure is in desperate need of investment, but how to fund it is where everybody gets tripped up. Where are they going to get the money?”

“I would not put a lot of hope in something being passed,” she added.

Plenty of opportunity

The Virtus Duff & Phelps Global Infrastructure Fund’s strategy is to seek capital appreciation by investing in infrastructure companies around the world that have long-term contracts and lead to stable revenue streams and cash flow. These companies “generally pay attractive dividends and can grow them over time,” Luecke said.

This makes for a conservatively invested portfolio. “We are not looking to blow the lights out; we are looking to provide a long-term stable product,” Luecke said.

She believes investors can do well by looking to “areas of infrastructure that have been for years funded by the private sector.” Within the U.S., these areas include telecommunications and water and gas utilities, which are relying increasingly on private companies for maintenance and equipment replacement.


Virtus Investment Partners
Connie Luecke, manager of the Virtus Duff & Phelps Global Infrastructure Fund.

American Tower /zigman2/quotes/200890312/composite AMT -2.09%  and Crown Castle International Corp. /zigman2/quotes/202885080/composite CCI -1.83%  are real estate investment trusts that operate and lease wireless infrastructure (cellular towers and supporting structures and equipment) to AT&T Inc. /zigman2/quotes/203165245/composite T -0.48% , Verizon Communications Inc. /zigman2/quotes/204980236/composite VZ -0.40%  and other carriers. Both are held by the Virtus Duff & Phelps Global Infrastructure Fund.

“There is a lot of investment going on in small cells, which are more local, in cities and urban developments. The investment will continue, not only in urban areas, but the government is pushing for more wireless broadband in rural areas,” Luecke said.

Tax reform can help, with AT&T already saying it will increase its planned 2018 capital spending by $1 billion .

/zigman2/quotes/207068784/realtime
US : U.S.: Nasdaq
$ 14.64
-0.23 -1.55%
Volume: 0.00
Sept. 18, 2020
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/zigman2/quotes/205893366/realtime
US : U.S.: Nasdaq
$ 14.63
-0.23 -1.55%
Volume: 0.00
Sept. 18, 2020
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/zigman2/quotes/200890312/composite
US : U.S.: NYSE
$ 245.50
-5.23 -2.09%
Volume: 3.27M
Sept. 18, 2020 4:00p
P/E Ratio
56.94
Dividend Yield
1.76%
Market Cap
$108.90 billion
Rev. per Employee
$1.48M
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/zigman2/quotes/202885080/composite
US : U.S.: NYSE
$ 159.68
-2.97 -1.83%
Volume: 3.02M
Sept. 18, 2020 4:00p
P/E Ratio
88.69
Dividend Yield
3.01%
Market Cap
$69.82 billion
Rev. per Employee
$1.07M
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/zigman2/quotes/203165245/composite
US : U.S.: NYSE
$ 28.93
-0.14 -0.48%
Volume: 45.86M
Sept. 18, 2020 4:03p
P/E Ratio
17.67
Dividend Yield
7.19%
Market Cap
$206.13 billion
Rev. per Employee
$637,332
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/zigman2/quotes/204980236/composite
US : U.S.: NYSE
$ 60.35
-0.24 -0.40%
Volume: 22.58M
Sept. 18, 2020 4:00p
P/E Ratio
13.05
Dividend Yield
4.16%
Market Cap
$249.73 billion
Rev. per Employee
$905,626
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