By Angela Harmantas
Canada is seriously lagging behind its developed peers when it comes to infrastructure spending, so why did the country’s second-largest pension fund decide to make a billion dollar investment outside our borders? Today on Before the Bell we’re discussing the disconnect between infrastructure needs and spending priorities, and giving you a few companies to watch in case the new government decides to take action on Canadian infrastructure – here’s what you need to know today:
The Canadian federal election is entering the home stretch and one sector of the economy is emerging as a major force in the election. Infrastructure spending has come under the microscope of late, with each major political party pledging to increase spending on roads, transport and ports. The pledges are coming at a time when the Federation of Canadian Municipalities, which represents Canadian mayors, estimates the country has fallen behind in infrastructure spending by $123 billion over the last fifty-odd years. It’s an ideal time for governments to invest in upgrading and building existing and future infrastructure, given the low interest rates that make borrowing the massive amounts of money necessary. Today’s investing idea looks at 5 infrastructure stocks that could get a government boost if these infrastructure plans are put into action after the election. I’d add to this list names like ATCO Ltd (TSE: ACO.X), Veresen Inc. (TSE: VSN) and IBI Group Inc (TSE: IBG). Do you think these names belong in the same conversation as the five already listed?
It’s funny that we’re talking about infrastructure spending in Canada today because the country’s second-largest pension fund just made a significant investment outside Canadian borders. Quebec’s Caisse de depot announced on Monday that it is partnering with Mexican institutional investors to spend CAD$1.4 billion on Mexican infrastructure projects. I’m not going to argue that it’s a bad investment – there are real opportunities to be had in Mexico after the government recently lifted restrictions on foreign investment in the energy and transportation industries. But given what we’ve just talked about with regards to Canada’s own outdated infrastructure spending, couldn’t this money be spent within our own country? Maybe it’s a simple business case and the potential returns are greater in Mexican infrastructure development. Can anyone enlighten me here? In any case, keep an eye on the news from Canadian infrastructure companies with Mexican exposure – such as ATCO Ltd.
Finally, if you were anywhere near social media yesterday, you probably heard about the internet’s new most hated person. That dubious honour goes to Martin Shkreli, founder and CEO of Turing Pharmaceuticals, who recently purchased the US rights to Daraprim, a drug used to treat deadly parasitic infections and promptly raised the price of a pill from US$13.50 to US$750. Shrekli’s “justification” is that Daraprim was underpriced compared to its peers, as cancer drugs can cost hundreds of thousands of dollars. I don’t see how there is any other way to frame this supposed business decision other than the pure pursuit of further profit, even if healthcare companies sometimes do struggle with off-brand or generic drug competition once their patents run out. Is there a case to be made in favour of raising a drug’s price by over 5000%? I won’t like it, but I will print it in future blogs.
Do you have a burning question you’d like answered by an investment expert or analyst? Let me know and I can post the answer here in the blog. Contact me by email at angela@smallcappower.com or on Twitter: @aharmantas.
