The cities of the future will be extraordinary things. Not quite on the level of The Jetsons, but still something I look forward to seeing. While I don’t expect to see flying cars anytime soon, cars will soon drive themselves. The entire transportation industry is about to be transformed, and it will be one of the biggest investment themes for the next 20 years. And it’s not just car stocks that will profit. Infrastructure stocks will be along for the ride.
Cities will require a good bit of maintenance to prepare for the boom, and infrastructure will play a key role in that. Think materials, construction equipment and engineering firms. No matter their expertise, the infrastructure stocks responsible for paving the road (pun intended) for self-driving cars will profit handsomely.
The rollout of 5G will play an integral role in that, as it is what will keep the self-driving cars connected. As I recently talked about in another article, this new generation of mobile technology is expected to debut next year and will eventually take over our lives.
In order to get where it ultimately needs to be, 5G will require many more cell towers and upgrades to those that already exist. Crown Castle International (NYSE:CCI) is in perfect position to benefit from this. It is a real estate investment trust (REIT) that owns, operates, and leases more than 40,000 cell towers and 65,000 miles of fiber.
The stock has been an impressive performer amid the recent market volatility. It hit a new all-time high this week, and even managed to close higher on the day the Dow lost 799 points. This relative strength is a good sign for the future of CCI.
Don’t Count Out the Materials
Materials are an old-school way of looking at infrastructure — and infrastructure stocks, but we can’t improve the country’s roads without them. Who hasn’t complained about the conditions of the roads we drive? I know I have, and I don’t even own a car!
When it comes to self-driving cars, safe roads will be even more important. One company that should benefit is Vulcan Materials (NYSE:VMC). It provides construction aggregates such as concrete, asphalt, and gravel to the companies that will be fixing the roads. On top of the upgrades needed for self-driving cars, there is also the typical maintenance that is far overdue.
VMC stock has been underperforming along with its peers lately as many fear that a much-needed infrastructure bill is a long way off because of the current split in D.C. politics. I may be too optimistic, but I still believe we’ll see a deal passed in 2019 as infrastructure improvements are one thing the left and right seem to sort of agree on. Materials companies will get a major boost if that turns out to be true. And with VMC trading with a P/E ratio of 18.7 and a PEG ratio of 1, the downside risk is limited while upside potential is significant.
There is no longer any doubt that the future of our cities will include self-driving cars. Now is the time to position your portfolio to profit from the next great shift in how people get from point A to point B.
Matthew McCall is the founder and president of Penn Financial Group, an investment advisory firm, as well as the editor of FUTR Stocks and the ETF Bulletin. Matt just launched two new investment advisories focused around the “next” generation investing theme. His trademark three-prong investing approach targets the mega-trends old Wall Street is missing out on. Click here for more information on the “NexGen” Experience.