It has been a brutal year for construction stocks, but hedge funds and exchange-traded funds tracking the construction sector have provided modest appreciation.
The popularity of exchange-traded funds (ETFs) has exploded in recent years, bringing increasing play to construction and infrastructure stocks. Miami's Mastec Inc. (NYSE:MTZ) is included in at least 26 ETFs—such as First Trust's Clean Edge Smart Grid (NASDAQ:GRID)—and that exposure is good for the firm, says J. Marc Lewis, Mastec investor-relations coordinator.
"I'm sure it does help drive demand for our stock," Lewis tells ENR. "If investors are looking for [a collection of] strong companies and some diversity, then they might buy an ETF rather than shares of individual stock."
A June report from Citigroup Inc. says that global assets invested with hedge-fund firms could soon rise to more than $5 trillion from today's record high of $1.2 trillion. A listing in an ETF acts as a plug of sorts by an investment firm for that company, which becomes a benchmark for the success of the entire sector.
"It's based on the belief of the fund manager that the company has a good business model and growth prospects," Daniel Frykholm, spokesman for Swedish equipment and materials supplier Atlas Copco (STO:ATCO-A), tells ENR. The company is featured in Invesco PowerShares' Emerging Markets and Infrastructure Portfolio (PXR).
Transparency, liquidity, the methodology behind the selection of holdings and the tendency of an ETF to take "net long" positions all help investors to be comfortable with companies included in a fund's holdings.
"Stock prices, like anything else, are set by supply and demand, so the more ETFs a company is in means more prospective demand for its shares," says Thomas Graves, equity analyst for S&P, which, like ENR, is a unit of The McGraw-Hill Cos.