Top resource ideas: US Global on mega-trends

Posted Nov 10th 2007 1:10PM by Steven Halpern
Filed under: India, China, Brazil, Russia, Newsletters, Caterpillar (CAT), Mexico, Commodities, Stocks to Buy

This article is part of a 20 article special report on "Metals, miners and money".

A highlight at the recent New Orleans Investment Conference was a speech by Frank Holmes, CEO of US Global Investors, on "mega-trends" -- with a focus on global infrastructure needs, from the U.S. to China.

Here, we offer excerpts from his speech, as well as some specific stock ideas from Frank Holmes and US Global Investors' Chief Strategist, Jack Dzierwa.

"Megatrends are usually defined by sustainable and substantial growth in capital expenditures in any country or sector. They can be created by governmental policies for infrastructure or a massive technological breakthrough.

"We isolate megatrends through a series of proprietary models, including a top down analysis of such issues as global macroeconomic theme, regional and country trends, technological trends, government policies, and currency effects. As examples of megatrends:

1950s -- 1960s Megatrend: Massive growth of infrastructure in the U.S. and Europe leads to post-war prosperity, creating a wealth effect and consumer culture.
1990s -- Present Megatrend: Moore's Law and disruptive technologies lead to massive growth in information technology and data communications.
2000 and beyond Megatrend: Unprecedented change in global growth driven by globalization, urbanization, and wealth creation leads to a global infrastructure boom on a massive, intractable scale.

"Infrastructure is an essential element of a country's culture, economic vitality, and global competitiveness. Demographic change is sweeping the global landscape as urbanization will necessitate the need for basic city infrastructure.

"By 2008, half of global population (or more than 3 billion people) will live in urban areas. Next year, projected urban population will be larger than the entire world population in 1965. Worldwide infrastructure needs are estimated at $30 trillion by 2030.

"The American Society of Civil Engineers (ASCE) gave U.S. infrastructure a 'poor' rating. The ASCE estimates that the U.S. requires an investment of $1.6 trillion just to catch up.

"In the U.S., 97% of roads/bridges/tunnels require upgrades as do 88% of rail systems. Congress estimates that airports alone require $14 billion for modernization and expansion every year.

"Publicly listed global assets include toll roads, bridges, ports, airport operators, utility companies, and transmission towers. In addition to listed infrastructure assets, one can invest in companies that are directly involved in infrastructure creation.

"This would include a wide spectrum of industries: steel, cement, pipes, construction companies, and examples of specific companies would be Caterpillar (NYSE: CAT), Cemex (NYSE: CX), Chicago Bridge and Iron (NYSE: CBI) and Jacobs Engineering (NYSE: JEC)."

Jack Dzierwa also offers some specific stock picks for the infrastructure theme. He explains, "I chose these ideas from different markets to illustrate how wide the opportunity is:

"Grupo Aeroportuario del Sureste (NYSE: ASR): has concession to operate nine airports in Mexico's southeastern region (including Cancun and Merida). In the last five years, ASUR registered a CAGR in revenue of 12.2%, EBITDA growth of 12.7% and earnings growth of 21.9%.

"The opening of Terminal 3 in Cancun earlier this year bodes well for future growth in this attractive tourist market, occasional weather turbulences notwithstanding.

"Aecom Technology (NYSE: ACM) is a planning and construction management services firm operating in a wide range of infrastructure projects around the world. The company has 30,000 employees in over 60 countries.

"Around 39% of revenue outside of the USA. Aecom experienced a CAGR in revenue of 20% between 1996 and 2006. CAGR in net income of 25% between 2002 and 2006. The company's lines of business include Facilities/Building, Transportation, Environmental, and Energy & Power."

Each day, Steven Halpern's TheStockAdvisors.com website features the latest investment commentary and favorite stock picks of the nation's leading financial newsletter advisors.

Tags: cat, caterpillar, CBI, cemex, ChicagoBridgeAndIron, cx, frank holmes, Jack Dzierwa, Jacobs Engineering, JEC, megatrends, Steven Halpern, TheStockAdvisors.com, us global investors