The world is getting smaller. We hear this all the time. The reality is not that the world getting smaller- travelling around the world is getting easier. As global trade continues to expand and multinational corporations spread around the globe, we will continue to see an ever-expanding need for an improved infrastructure. The projects that will help to build out the infrastructure, as well as the work that will be needed to maintain it, require a tremendous amount of financing and manpower. The globalization of consumerism is creating the demand and is the force behind the next big growth cycle.
As we wonder where new jobs will come from, just consider what it takes to build a single bridge-the architects, engineers, and the laborers. Here in America, many of our existing bridges and roads are behind schedule in terms of maintenance and repairs. In fact, our population has grown dramatically over the years and our entire infrastructure can use updating. All these jobs by definition are domestic- you cannot outsource these jobs overseas. Compare our infrastructure to China. The U.S. highway system has more than 27,000 miles of highway that was built over several decades. Just within the last several years, China has built almost 25,000 miles of highway and has announced that it is planning on expanding its highway system to more than 50,000 miles by 2020, while adding 97 airports and also almost doubling its shipping container traffic. China is employing their workforce to help bring up their standard of living while also creating a population that can consume. Hello, Washington!
When we think of the transportation infrastructure, Americans tend to think domestically, as usual. While our last generation was amazed by the construction of the Golden Gate Bridge in San Francisco and the Verrazano-Narrows Bridge in New York City, we just saw the completion of the multibillion-dollar Chunnel connecting separate countries in Europe. While some people will continue to dwell on the last recession, we should realize that the globalization of consumerism will lead to further projects with a scope we can’t even imagine.
The global infrastructure build-out is taking place on every continent, but there is a reason everybody thinks about China as much as they do. While the tremendous infrastructure stimulus package initiated domestically was enough to awe any central banker, it is dwarfed by the spending taking place in China. There are no less than a dozen massive new bridges being built throughout China, with dozens more on the drawing board. We think Texans think big? The construction of the Three Gorges Dam in China required more than 350,000 tons of steel, and it will have the capacity to produce the power equivalent of 15 nuclear power plants.
We also need to think about the new energy grids and massive communication projects required to keep up with ever-increasing global trade. And while I urge investors to think globally, we cannot even stop there. I recently read about “pods” or channels being thought out that will greatly enhance space travel. Japan has announced and already started construction of a new power plant that will orbit in space and beam energy back to Earth. I am not talking about science fiction here; I am talking about a $20 billion project already initiated that is putting engineers, manufacturers and suppliers to work today. Our domestic space program is just kicking back into gear and our exploration of our deep oceans is just beginning.
Currently, 30% of our work force is employed in industries that did not even exist 30 years ago. This amazing fact may be repeated again over the next 30 years. Who knows what to expect in the field of transportation that will lead to even more of a global community. Some current ideas range from flying cars, jet-pack lanes, underwater subways, hover boards and teleportation. In fact, believe it or not in 2009 scientists announced the first actual teleportation event- beam me up, Scotty! We can only imagine the new job opportunities and the amount of new investments required to pull off future scientific ventures. Capital-intensive projects and industries are never funded with cash. We will ultimately see multibillion-dollar financing put together in the capital markets generating multimillion-dollar fees to the financial firms putting together the deals. Don’t for a minute think Wall Street is dead- it is just spreading out around the world.
We do not need to think of all these magnificent large-scale technology advancements to be excited about the opportunities to invest in the infrastructure sector of today. With the advent of the Internet, consumers and businesses from around the world are changing the landscape of purchasing, distribution, and international shipping. I believe the next growth cycle will lead to an even higher level of global trade and infrastructure needs.
In my new book, The Magnet Method of Investing (Wiley, 2009), I showed the list of companies that ranked out the highest on my model as we went to print. Using my Magnet® Stock Selection Process, I use a “bottoms up” approach to identify the individual companies within each sector that have the best combination of value, growth and momentum. The list was not intended as a buy list- just a list of the top ranked companies according to the Magnet model. It was interesting to see how many of the top ranked companies are based overseas.
I have no doubt there will be great opportunities presented in the various sectors that benefit from the ever-expanding infrastructure being built around the world. Some of the new market leaders will come from all corners of the world. As always, many of the leaders of the next bull markets are now small companies that many investors have not heard about yet. That is why investing is so interesting- and potentially rewarding.
*DISCLOSURE: No relevant position
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