Infrastructure Stocks Too Hot to be Investable

2021-04-08

Introduction

When investing in the stock market, it is not uncommon that certain sectors will become either red-hot or stone cold. Right now, classic infrastructure stocks have become red-hot. The question is, have they become too hot to be investable?

There are times when certain sectors get hot, and they run and sometimes they run for good reasons. However, sometimes they run without good reasons.

That is really part of the dilemma, when you discover something that’s real trendy, the average lay investor tends to get caught up in the hype and the hysteria, but the problem is they’re usually late to the party. And that is one of the real dangerous aspects about trying to invest in trends. A major investment trend today is infrastructure spending. Under the current administration, there’s a lot of talk about a massive multi-trillion-dollar infrastructure spending plan. And as a result, a couple of things have happened.

Infrastructure stocks have gotten hot. Nevertheless, as an investor, the oldest adage in investing is buy low and sell high. But suddenly, the world has decided that infrastructure is a good place to invest and this surge in demand has driven their prices and valuations to stratospheric levels. More simply stated, the demand for infrastructure stocks has risen dramatically and the market has driven up their prices. That is a problem because the typical plight of the average everyday investor is that they discover the trend too late. The secret of winning from the trend is to get your money invested ahead of the trend. Now, that is easier said than done. But the reality is that until the election was settled, which was not very long ago, we really did not know what was going to happen regarding infrastructure spending.

But having said that, infrastructure has been a political bipartisan issue for quite a long time. We all have known for some time that our country’s infrastructure needs repair and refurbishing. Bridges and a lot of other infrastructures need to be rebuilt.

So, infrastructure stocks have actually been of interest for quite a while. However, due to recent political events, the catalyst has been injected and the infrastructure stocks have taken off. Therefore, I am going to look at some of the major infrastructure stocks that we are all familiar with through the lens of FAST Graphs. In addition to revealing valuation, I want the viewer to also become vividly aware of exactly what kind of businesses the typical infrastructure stock has been. But most importantly, we will look at what the future might look like under our current environment.

With this FAST Graphs Analyze Out Loud I will go over Federal Signal (FSS), Oshkosh (OSK), Cummins (CMI), Deere & Co (DE), Alamo Group (ALG), Astec Industries (ASTE), Terex (TEX), Allison Transmission (ALSN)

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Disclosure:  Long CMI.

Disclaimer: The opinions in this document are for informational and educational purposes only and should not be construed as a recommendation to buy or sell the stocks mentioned or to solicit transactions or clients. Past performance of the companies discussed may not continue and the companies may not achieve the earnings growth as predicted. The information in this document is believed to be accurate, but under no circumstances should a person act upon the information contained within. We do not recommend that anyone act upon any investment information without first consulting an investment advisor as to the suitability of such investments for his specific situation.

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