Profit from Electric Power Outage in India with AES and Caterpillar
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One man's blackout across a country is another man's investing profit from across the world. The recent electric power outage in India that left 600 million without electricity has flipped a switch on the desperate need for the improvement and expansion of the power grid and other components of the infrastructure in that country and in many others around the world. Profiting from this will be companies such as Caterpillar (NYSE: CAT), Siemens AG (NYSE: SI), The AES Corporation (NYSE: AES), ArcelorMittal (NYSE: MT) and Fluor Corporation (NYSE: FLR).
The AES Corporation Corporation is a major utility company that owns and operates electricity generation and distribution facilities in 27 countries around the world. Electricity is generated from coal, diesel, fuel oil, natural gas, biomass, wind, and solar sources for clients in the residential, commercial, industrial, and governmental sectors. AES is an investor in Orissa Power Generation Corp. Ltd, located in India. On a quarterly basis, earnings-per-share growth is increasing by 49.42% for The AES Corporation.
Siemens AG, headquartered in Munich, provides many services to utilities and other industrial clients. According to one report, "In the industry sector, the company's portfolio includes industry automation and drives products and services, and system integration and solutions for plant business. It offers various products, services, and solutions for the efficient use of resources and energy, and for productivity in industry and infrastructure areas. In the energy sector, the company offers products, services, and solutions for the generation and transmission of power; and for the extraction, conversion, and transport of oil and gas." Even though European stocks are down due to the recession on the continent, Siemens AG is up 7.34% for the last week of market action, with earnings-per-share growth rising by 66.01% for the year.
A heavy construction company, Fluor Corporation, "provides engineering, procurement, construction, maintenance, and project management services worldwide." It offers many of these services to utility plants. Earnings-per-share growth for Fluor Corporation is up 72.19% for 2012.
Building a new utility plant in India or any other country to mitigate the chances of an electric power outage requires a great deal of steel. AcrelorMittal, headed by Likshmi Mittal from India, is the largest steel company in the world. Declining growth around the world has punished the steel sector, resulting in very attractive valuations: the price-to-book ratio is 0.43 and the price-to-sales ratio is 0.26.
Improving and expanding the infrastructure of a country requires a great deal of construction equipment. The largest manufacturer of heavy machinery in the world, Caterpillar will plow ahead when global infrastructures expenditures rise. The Big Cat has 16 manufacturing facilities in The People's Republic churning out its signature yellow and black equipment, with nine more under construction. For this year, earnings-per-share growth is up 78.22% for Caterpillar.
The bullish outlook for these companies is evinced by the level of institutional ownership. When an institutional investor, such as a mutual fund or pension group, buys it is a very bullish signal. These investors are heavily courted and have robust research resources, so only the best investments are made. Institutional investors own 91.57% of the shares of The AES Corporation. At present, the level of institutional ownership in Fluur Corporation is 86.51%. Almost two thirds of the shares of Caterpillar, 65.67%, are owned by institutional investors.
Making these companies more attractive to all investors, both institutional and individual, are the dividend incomes. The average dividend yield for a member of the Standard & Poor's 500 Index is around 2%. At ArcelorMittal, the dividend yield is 4.98%. Siemens AG pays a dividend of 4.35%. The Big Cat provides dividend income at the rate of 2.45% for its shareholders. Fluor Corporation has a dividend yield of 1.23%.
Every country in the world needs to spend heavily to maintain and upgrade its infrastructure, not just India. That electric power outage in that country was just the most recent, highly visible example of the dire, worldwide need. The companies that build and maintain the infrastructure will profit greatly in the future. The blackout in India has shined a light on the bullish outlook for these stocks in the global infrastructure sector.
jonathanyates13 has no positions in the stocks mentioned above. The Motley Fool owns shares of Fluor and ArcelorMittal. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.
