The market crash has been painful. But when prices fall dramatically, it’s a great time to be buying. If you want to position yourself for the next decade and beyond, now’s the time.
But where should you invest? Several bounce-back candidates could rocket higher by 100% or more if conditions stabilize. That’s what oil and airline investors are betting on. This is a reasonable strategy, but one that involves a bit of luck.
Your best bet is to find stocks that are trading at a discount yet have years of growth ahead of them. That way, you secure an attractive entry point during the market crash, and can hang on through 2030 and beyond. As Warren Buffett suggests: Instead of swinging at every pitch, swing hard at the right pitch.
This is the right stock
Brookfield Infrastructure Partners L.P. (TSX:BIP.UN)(NYSE:BIP) was established over a decade ago to take advantage of the world’s biggest growth opportunity: population growth. Since 2009, shares have more than tripled.
The strategy is clearly working, but what exactly does it entail?
As its name suggests, Brookfield owns a wide variety of infrastructure assets located all of the world. The main sectors include utilities, transportation, energy, and communications.
For example, in 2012, Brookfield purchased stakes in multiple toll road operators. In 2014, it acquired a 50% interest in the French telecom group TDF. In 2016, it bought the Australian port assets of Asciano Limited.
That year, the company also took a controlling stake in a Brazilian natural gas pipeline. Its infrastructure assets now span Peru, the U.S., Chile, Brazil, Canada, France, and Australia.
What makes these assets a play on population growth? As populations rise, demand for infrastructure increases. More trade benefits port operators. More vehicles benefits toll road owners. More housing benefits natural gas projects.
As long as populations continue to rise, Brookfield’s portfolio will increase in value, even if a market crash presents a short-term slowdown. Potential shareholders should be pleased to know that the United Nations expects global populations to continue rising until at least 2100. Now that’s a growth opportunity!
Forget about the market crash
Because population growth is a century-long opportunity, Brookfield can truly plan for the long term. It’s decades that matter, not months, which is what makes the latest downturn so enticing.
Brookfield doesn’t just own assets. It buys and sells them through active portfolio management. When prices are high, it sells off mature assets. But when prices fall, the company goes bargain shopping.
Before the market crash, Brookfield sold four projects in the transport, energy, and utilities sectors for a combined $1 billion. The sales prices representing a 17% annual return on investment.
While that was good timing, given the firm’s experienced management team and history of success, it shouldn’t have been surprising.
Now armed with $3 billion in liquidity, Brookfield has been opportunistically adding to its portfolio. It shelled out $600 million for Indian telecom towers and a New Zealand data distribution business, $500 million for a North American rail project, and $150 million for a North American natural gas pipeline.
But the company still has nearly $2 billion in liquidity left. If markets continue to suffer, Brookfield will only grow stronger by purchasing discounted assets.
During a market crash, Brookfield stock really is the best of both worlds. Its portfolio is truly long term, meaning that returns will still be lucrative over a multi-year period. But if prices remain depressed, the company can acquire prized assets at fire-sale prices.
