Infrastructure Stocks?

[greg]

I was watching the Minneapolis/I 35 bridge collapse news last nite and the problems with our national infrastructure deterioration came up. A report card was put up on screen for the US, and in most areas we rated C at best but mostly D or D-, especially for highways, airport congestion, and sewer-water supply problems. Lots of fix up and expansion over the next twenty years.

I'm currently happy with my water etfs. But I'm looking for a stock or two that might nab some money from increased rebuild and build out of above and/or on ground infrastructure. Maybe public cement companies? Maybe engineering companies? I'm fishing for ideas? Did I mention I like dividends?

--greg

[justin]

Engineering companies definitely. That is, if the govt actually allocates any money into this field...

It's a good day to be a civil engineer!

[twaddle]

I don't expect a surge of infrastructure improvements, but I do expect a surge in inspections.

Which engineering firms specialize in bridge inspections?

[justin]

As far as I know, all the big civil firms do bridge inspection. Not sure how many are public. URS is one that does bridge inspection and I'm pretty sure they are public.

I know my (very small) firm does environmental documentation/roadway design for (relatively small) bridge replacements. I was just looking this morning at the DOT's schedule of bridge replacements around here to get a feel for prices. The cheapest bridges start at $600,000 and the average price is probably around a million, maybe a little more. And this is for very basic, typically 2 lane bridges with easy constructibility. Figure 10% of the cost is engineering design/professional services fees.

I don't really see a big surge in bridge/other infrastructure construction activities. Not enough people died. I'm sure we'll get a lot of lip service, probably a couple of bucks thrown to maintenance/inspection special programs for a few years, and that's probably it. I don't foresee a big change in level of infrastructure spending. Although it is an election year, so all bets are off...

[brewer12345]

Haven't had tme to really look at it, but I think GLDD might be worth a gander.

[bssc]

For some reason, Halliburton came to mind.

[brewer12345]

Originally Posted by bssc

For some reason, Halliburton came to mind.

But only if you want to sell you soul.

[starter82]

Originally Posted by justin

It's a good day to be a civil engineer!

Also a bad day!

[CCdaCE]

You must've overheard how many areas need dredging on the Great Lakes. I thought Great Lakes Dredge & Dock looked pretty interesting, but maybe the market's already priced it correctly. Interesting company (to me), but bad financials maybe. Net profit margin sucks, at this point.

Insituform Technologies, you see them "everywhere" if you look. Rehab-ing sewers, etc. Miles of 50-,75-,100-year old sewers out there. They have a magical technology to stick a new pipe liner in without digging up the pipe. At times, they seem like a good company, but then the bottom falls out. Maybe their patent expired or something. I've never dug into it much. Cyclical perhaps, like construction seasons. They're approaching a 52 week low. Again, their profit margin is pretty low, but seems to spike occasionally.

US Gypsum is getting smacked by a lawsuit, if I recall, but I've been keeping my eye on them.

Lafarge would've been good to own 3-4 years ago, but maybe there's still a little gas left in the tank from growth in China and India, South America, etc.

All of this is entertainment, to me, as in, I don't own any more of these than are in my VTSMX (VG Total Stock Market) shares.

-CC

[ERD50]

Originally Posted by greg

I was watching the Minneapolis/I 35 bridge collapse news last nite and the problems with our national infrastructure deterioration came up. A report card was put up on screen for the US, and in most areas we rated C at best but mostly D or D-, especially for highways, airport congestion, and sewer-water supply problems. Lots of fix up and expansion over the next twenty years.

--greg

greg - just for a little 'outside of Minnesota' perspective: I watched a Chicago PBS interview (Phil Ponce) on infrastructure in the US, with the I35 bridge the main topic. The civil engineers and politicians interviewed all seemed to think of Minnesota as ranking very high in overall infrastructure maintenance. They had a former Milwaukee mayor on, he talked about how hard it is for politicians to fund these sorts of projects, as 'maintenance' is pretty boring (until something bad happens). There are always more 'dramatic' issues fighting for dollars.

Considering everything, I'm surprised these events are as extremely rare as they are. I have not checked the stats, but this may not have happened before in my lifetime. [actually, more than I thought: nine with deaths in the US in my lifetime]

List of bridge disasters - Wikipedia, the free encyclopedia

This is a tragedy, but about 100 lives are lost every single day of every single year in more 'mundane' accidents that don't get national coverage.

-ERD50

[wildcat]

Originally Posted by CCdaCE

You must've overheard how many areas need dredging on the Great Lakes. I thought Great Lakes Dredge & Dock looked pretty interesting, but maybe the market's already priced it correctly. Interesting company (to me), but bad financials maybe. Net profit margin sucks, at this point.

Insituform Technologies, you see them "everywhere" if you look. Rehab-ing sewers, etc. Miles of 50-,75-,100-year old sewers out there. They have a magical technology to stick a new pipe liner in without digging up the pipe. At times, they seem like a good company, but then the bottom falls out. Maybe their patent expired or something. I've never dug into it much. Cyclical perhaps, like construction seasons. They're approaching a 52 week low. Again, their profit margin is pretty low, but seems to spike occasionally.

US Gypsum is getting smacked by a lawsuit, if I recall, but I've been keeping my eye on them.

Lafarge would've been good to own 3-4 years ago, but maybe there's still a little gas left in the tank from growth in China and India, South America, etc.

All of this is entertainment, to me, as in, I don't own any more of these than are in my VTSMX (VG Total Stock Market) shares.

-CC

Maybe true now but GLDD is sitting on a record backlog of projects that stand a good chance of being completed. With the scale GLDD has, I would say there is a good probability of being awarded future contracts. Assuming the domestic business picks up from the current stagnant levels, we could easily have a FCF yield well over 10% on a market leader. Not a bad financial picture if you ask me.

[greg]

Originally Posted by ERD50

This is a tragedy, but about 100 lives are lost every single day of every single year in more 'mundane' accidents that don't get national coverage.

-ERD50

And you're right, but I still see a mindset change coming over the next few years. It may also be mundane at times (fixing broken stuff?), but the younger generation knows better than us what will need fixing. I think they see things we don't, or at least they won't ignore the things that shouldn't be ignored. (Anyway, that's my story and I'm stickin to it.)

GLDD: I probably read the same article as others about deteriorating Great Lakes infrastructure and needed dredging and such. The Corp. of Engineers does alot of that work up here. I'll keep an eye on this stock.

Our town, earlier this spring, slid some of those giant rubber-like tubes inside the old sewers near our house. Slick as all get out. I watched for about an hour. Plus, I already have this company on my watch list after watching/smelling the results. (We still need an emoticon with a clothespin on his nose: right here.)

I like Lafarge. I'll keep my eye on it. As I investigate, I'm starting to see some of my difficulty: States mostly direct repair and replacement of infrastructure. They choose local companies. Most local companies, such as cement plants and construction companies are local companies and usually privately held. Same with engineering firms. Are there any steel companies that specialize in rebar?

If CAT dips below $70 this month, I might buy that.

Haliburton: I had an argument discussion with a fellow in 2002 when the stock price was at $13. He bought; I didn't. I was offended that Dick C.* was formerly president. I was not the one that laughed all the way to the bank. (But that still doesn't mean we shouldn't have a clothespin-nose emoticon, right here*.)

Anyway, this stuff has me thinking in good ways, and the more stock ideas I see the better my choices and thinking.

Thanks.

[CCdaCE]

Originally Posted by greg

<snip>

I like Lafarge. I'll keep my eye on it. As I investigate, I'm starting to see some of my difficulty: States mostly direct repair and replacement of infrastructure. They choose local companies. Most local companies, such as cement plants and construction companies are local companies and usually privately held. Same with engineering firms. Are there any steel companies that specialize in rebar?

<snip>

Local companies buy cement/flyash/etc. from Lafarge to make concrete. There's not many other suppliers in N. America.

Nucor is a good company to consider for rebar/steel.

But, like I said earlier, I think you're 2-3 years too late. China and India have already driven the price way up. Might still be some gas left in the tank, though, just not as much as Lafarge has been run up already, for instance.

-CC

[greg]

CCdaCE:

re: GLDD. About a month or two ago I read a short article somewhere that said because of six years of deferred dredging and maintenance it would now cost over $6 billion to bring the Great Lakes transportation and harbor system up to snuff, instead of the $100-$200 million if maintenance hadn't been deferred. This might be a great niche stock at some future point. My cousin works for the local Corps of Engineers. I'll try to find out from him about deferred maintenance and let you know. He usually spends most summers on site at various ports but comes home some weekends.

This stock may be a good buy down the road. The original article that I read (which I can't find) seemed a bit slanted, but inferred that fixing the Great Lakes problems wouldn't begin to ramp up until post-2008. Supposedly, much of the earmarks over the past few years went to . . . um . . . more Republican areas of need. If steel stays strong (iron ore shipments) as well as coal (No. Dakota/Montana utility coal headed east), then there should be a fair share of bellyaching from industry and utilities in the future. This should stimulate some action. As I understand things, the time for this stock is not quite yet--maybe.

I'll get back to you.

[CCdaCE]

The other piece of info. that sticks in my mind is that Lake Superior is low, like lowest in 15-20 years, or something like that. So, combining all the sedimentation that's built up, the delay of dredging for years, and the low lake level... should add up to profits for GLDD, I'd think?

I'd have to look into where they get their contracts, as far as geographic location. Maybe they're centered in NY for all I know. Lots of stuff to check on this one.

-CC

[greg]

Originally Posted by CCdaCE

The other piece of info. that sticks in my mind is that Lake Superior is low, like lowest in 15-20 years, or something like that. So, combining all the sedimentation that's built up, the delay of dredging for years, and the low lake level... should add up to profits for GLDD, I'd think?

I'd have to look into where they get their contracts, as far as geographic location. Maybe they're centered in NY for all I know. Lots of stuff to check on this one.

-CC

This is an older article, but you get the drift:

MPR: Lake Superior's low levels cause problems for shippers

I spoke to my cousin briefly. He said that the Army Corps of Engineers nowadays bids out a majority of dredge work--when the money is there. He added that the newer dredging mandate, once money is available, will be to hire smaller and local outfits (privately held companies?). He knows of GLDD and will get back to me about it. They do more work on the lower Great Lakes than on Lake Superior, so my cousin has limited info so far.

I'll wait on this one (unless a healthy dip occurs, and I see a bargain right before my eyes). As I see it, some serious gov't money has to start flowing well before this stock takes off. But I've been wrong before.

So far, I've added CAT, FLR, LR and GLDD to my watch list.

[CCdaCE]

This article about GLDD was on Google Finance today.

The portion of the article that struck me as odd:

“The contracted backlog continues to be lower than historical levels because many Corps projects now are bid using a base plus options convention so that they can be funded in stages. However we are pleased that we have been able to diversify our customer base to include more projects on behalf of the private sector and local municipalities. Importantly, this has enabled us to be less reliant on federal contracts.

Diversification is good, but I would think Corps projects would be more profitable. I could be wrong.

-CC