The share prices of most infrastructure companies, both on the ASX and global exchanges, have been among the hardest hit from the coronavirus fallout.
And unlike technology shares, most infrastructure shares are still well below their February 2020 highs. For investors with a longer-term horizon (2 or more years), this spells opportunity.
Why infrastructure share prices could be heading much higher
Social distancing, lockdowns and border closures put into place to control the pandemic have seen developed nations around the world fall deeply into recession. That includes the United States — the world's biggest economy — and most nations across Europe.
Australia is on that list as well, with gross domestic product (GDP) plummeting 7% relative to the previous 3 months in the quarter ending 30 June, the biggest fall on record. Since GDP also contracted 0.3% the previous quarter, that makes it an official recession. The first since mid-1990 to early 1991 for Australia.
To lift their economies out of recession (and keep their jobs), politicians across developed nations are proposing massive government spending on infrastructure projects, possibly reaching into the trillions of dollars globally.
The stimulus plans would sound quite familiar to former US President, Franklin D Roosevelt. He was the one who pioneered the 'New Deal' in the 1930s. This opened up the government's purse strings to fund road, bridge, and construction projects that put millions of people back to work and put an end to the Great Depression.
1 ASX infrastructure share with built in diversification
There are many different global infrastructure shares that stand to gain as government building booms gets underway.
One way to invest across many of these with a single ASX share is through the Vanguard Global Infrastructure Index ETF (ASX: VBLD). This exchange-traded fund (ETF) holds 139 infrastructure shares across the globe.
Its major holdings focus on railways as well as energy and communications infrastructure companies. Furthermore, 66% of its market allocation exposure is in the US with 14% in Canada and 6% in Japan.
The ETF had a great start to 2020, with the share price gaining 12% through to 21 February, while the All Ordinaries Index (ASX: XAO) gained 6% over the same period.
Then the virus hit. And the share price tanked 25% through to its low on 25 March. It has edged higher from that low, but it's still down 22% from the February highs.
With governments prepared to fund a building boom that could run several years or more, there's no reason the Vanguard Global Infrastructure ETF couldn't see a return to its February highs. That would represent a 28% upside from today's price of $52.65 per share.
