Tesla CEO Elon Musk isn’t too impressed with U.S. infrastructure and his comments on the subject could spotlight related investment opportunities, including the FlexShares STOXX Global Broad Infrastructure Index Fund (NYSEArca: NFRA).
NFRA tries to reflect the performance of the STOXX Global Broad Infrastructure Index, which identifies equities that derive the majority of revenue from infrastructure business, providing exposure to not only infrastructure sectors, but non-traditional ones as well.
“We have a lot of crumbling highways and bridges and, frankly, when I visit China, I see their infrastructure as being much better than ours. It’s great. Europe has better infrastructure. It’s really quite sad that US infrastructure, especially roads and highways, is where it is today,” said Musk.
He also called U.S. airports an “embarrassment.”
Opportunities With NFRA
NFRA’s index focuses on long-lived assets in industries with very high barriers to entry, with at least 50% of their revenue from key sectors with a 3-month average daily trending volume of at least $1 million. The portfolio is weighted based on a free-float market cap with certain constraints to limit exposure in any one security, sub-sector, or country. Additionally, the fund is rebalanced annually.
“The American Society of Civil Engineers (ASCE) has criticized the state of American infrastructure, giving it a grade of D+ in its 2017 report card, the most recent one the organization has published,” reports Business Insider. “At the time, the ASCE estimated the US would have to spend $4.59 trillion by 2025 to make the necessary improvements.”
The infrastructure category has also historically offered higher dividend yields than global fixed-income and global equities, along with greater predictability of long-term cash flows. The ETF may be able to capture the growing demands of economic development that are driving more funding into transport, power, and other systems.
“Sometimes we spend a lot of money on these things, but what do we gain for it? We really need to be thinking about what is the transportation of the future, not the transportation of the past,” opined Musk.
One of the advantages of infrastructure is that regardless of what the global economy is doing, it’s a necessity. Furthermore, it’s less prone to the cyclical movements of the economy, which makes it a viable alternative as a defensive play.
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.