This Exceptional ETF Paves the Path to Almost a $1 Billion Investment Prospect
America's infrastructure is in a state of disrepair. The American Society of Civil Engineers gave the country a grade of C- for its infrastructure in their most recent report card in 2021. This poor grade has prompted Congress to pass legislation totaling nearly $1 trillion to fund essential projects for maintaining and improving the country's infrastructure.
The opportunity for investment is vast, and one way to potentially profit from this massive investment in America's infrastructure is through the Global X U.S. Infrastructure Development ETF (PAVE -0.03%). This exchange-traded fund (ETF) provides investors with a broad exposure to this investment trend.
Diving into PAVE
The Global X U.S. Infrastructure Development ETF invests in companies that stand to benefit from increased spending on U.S. infrastructure. The ETF holds shares in approximately 100 companies that produce raw materials, manufacture heavy equipment, and provide engineering and construction services.
Let's take a closer look at the fund's top three holdings:
- Trane Technologies (TT -0.41%): The fund has an allocation of 3.8% of its net assets in this climate solutions company. Trane produces commercial and residential HVAC units under the Trane brand and climate-controlled solutions for transporting refrigerated products under the Thermo King brand. The company has seen strong revenue and profit growth (up 11% and 21%, respectively, in the third quarter), and it generates plenty of cash, which it returns to shareholders through a growing dividend and aggressive share buyback program.
- Quanta Services (PWR -0.92%): The fund has a weighting of 3.5% to this civil engineering company. Quanta Services provides infrastructure solutions to various industries, including utilities, renewable energy, technology, communications, pipelines, and energy. The company has expanded its capabilities through several acquisitions this year and has a significant backlog of work lined up ($34 billion at the end of the third quarter), which should support its double-digit earnings per share growth in 2025.
- Eaton (ETN -0.15%): The fund has an allocation of 3.5% to this power management company. Eaton offers products for various markets, including data centers, utilities, industrial, commercial, machine building, residential, aerospace, and mobility. The company is growing at a healthy pace (with 8% revenue and 14% earnings per share growth in the third quarter) and has a substantial backlog of work lined up, giving it positive momentum as it enters 2025.
Global X U.S. Infrastructure Development ETF
The fund has a nearly 75% weighting in stocks from the industrial sector and almost 20% in the materials sector. These are cyclical industries that benefit from a growing economy and increased investment spending. All signs point to further growth in 2025, which should benefit the stocks in the fund.
36.4%
An outstanding performer
18.3%
Investing in infrastructure stocks can be challenging due to the cyclicality of the industry. You may have the correct thesis (infrastructure spending will increase), but pick the wrong individual stocks to capitalize on that view, which may underperform their peers due to company-specific issues.
21.3%
The Global X U.S. Infrastructure Development ETF eliminates this guesswork. By investing in a basket of companies that should benefit from increased infrastructure investment spending, investors can potentially earn strong returns. This has been the case for the fund's holders over the years:
15%
| Fund | One-Year Performance | Three-Year Performance | Five-Year Performance | Since Inception (March 2017) || --- | --- | --- | --- | --- || Global X U.S. Infrastructure Development ETF | 36.4% | 18.3% | 21.3% | 15% |
As the table above shows, the fund has delivered strong annualized returns over the years.
The fund's investors are in a favorable position to continue earning strong returns in 2025 and beyond. Many of these companies are growing at solid rates, which they expect to continue in 2025. This should enable them to invest in growing their businesses and return excess cash to shareholders through dividends and repurchases.
Paving the way to profits from infrastructure growth
The Global X U.S. Infrastructure Development ETF allows investors to invest in the nearly $1 trillion U.S. infrastructure spending megatrend. The companies held by the fund should be well-positioned to capitalize on opportunities to support infrastructure development, which should drive above-average growth. This should ultimately benefit the fund's investors, who could potentially earn strong returns from this ETF in 2025 and beyond.
The discussion about investing in the Global X U.S. Infrastructure Development ETF (PAVE) highlights its potential to profit from the significant investment in America's infrastructure. This ETF invests in companies that stand to benefit from increased spending on U.S. infrastructure, including those in the industrial and materials sectors, which are expected to grow alongside the economy and investment spending.
Given the vast opportunity for investment in this area, individuals may consider diversifying their portfolios by investing in ETFs like PAVE. By doing so, they can potentially benefit from the growth of companies that are integral to America's infrastructure development and earn strong returns.
