TOL - 16th Mar, 2024
Warryn Robertson's guide to picking the best infrastructure stocks on the ASX and abroad
Lazard's Warryn Robertson shares his rules for identifying the best infrastructure companies in Australia and abroad.
Warryn Robertson, portfolio manager and analyst at Lazard Asset management, understands the nuances of infrastructure assets like few others in the market. Robertson has been investing in these unique businesses for over two decades and is among Australia's pioneers of global listed infrastructure investing. His approach involves identifying monopoly assets with inflation-protected revenues, high margins, and reasonable leverage – then buying them at attractive prices.
Of the 400 listed infrastructure stocks globally, only 160 have passed these four filters, and typically, the Lazard Global Listed Infrastructure Fund will hold just 25 to 30 of those companies at any point in time.
Given the attractive nature of infrastructure assets, it is unsurprising that sovereign wealth funds and private equity firms are also circling these assets. Robertson estimates that of the 160 stocks that meet his criteria, 25 have been taken private and delisted. It's a shrinking universe.
The landscape in Australia presents an even more demanding scenario. Among the 14 infrastructure and utility stocks listed on the ASX and valued at more than $1 billion, there are only four that align with Robertson's stringent and "preferred infrastructure" criteria. The good news is that he firmly believes in concentrating capital on your best ideas and is not looking to own lots of stocks for the sake of diversification.
In this episode of the Rules of Investing, Robertson reviews the recent performance of infrastructure in an inflationary environment, explains why US utilities look vulnerable and shares what he believes are the best opportunities in infrastructure.
Robertson also reveals what he regards as the top infrastructure stock on the ASX and an infrastructure company with an absolutely stunning earnings outlook.
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Timestamps
- 0:00 - Introduction
- 1:35 - Did infrastructure deliver inflation protection?
- 4:12 - The outlook for infrastructure assets
- 7:25 - Why valuations in US utilities look vulnerable
- 11:18 - Will rising rates create balance sheet stress?
- 13:10 - Global M&A trends in infrastructure
- 17:05 - Emerging infrastructure assets
- 19:38 - The best opportunities in infrastructure today
- 20:57 - The stock that is just like Transurban (ASX: TCL) but better value
- 27:35 - An ASX infrastructure stock that passes the Lazard process
- 31:00 - Common misunderstandings about infrastructure assets
- 33:40 - What are people getting wrong about infrastructure right now?
- 36:27 - Two infrastructure stocks for the next five years.
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Investment Theme
The best inflation protection you can get
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Managed Fund
Lazard Global Listed Infrastructure Fund
Alternative Assets
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The Rules of Investing is one of Australia's top investing podcasts. We interview the leading investment minds from Australia and overseas to better understand their processes and philosophy. After launching in October 2017, there have been over 150 episodes published - you can access all content on Livewire Markets, Spotify and Apple Podcasts.
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2 stocks mentioned
1 fund mentioned
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Livewire Markets
The Rules of Investing is one of Australia's top investing podcasts. We interview the leading investment minds from Australia and overseas to better understand their processes and philosophy. After launching in October 2017, there have been over...
Livewire Markets
The Rules of Investing is one of Australia's top investing podcasts. We interview the leading investment minds from Australia and overseas to better understand their processes and philosophy. After launching in October 2017, there have been over...
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