Getting on to the next big trend
We have pivoted the HAM portfolio to gain exposure to the strong trend in infrastructure spending. The quote below came from a SME business survey conducted by the highly experienced and respected, Ross Cameron
I have been of the view that ‘infrastructure construction’ (if I can call it that) is going wildfire. This is from a construction guy earlier today that I interviewed …
“Industry in Victoria is busy. NSW is out of control. We haven’t even started the tunnel in Melbourne, we haven’t even started the third runway at Tullamarine. Once they start you won’t get a truck or escavator or even materials. Some of the quarries will close down for 6 months because they’ll have a huge contract with Tullamarine and I won’t even be able to buy materials from them. So I’ll have to buy materials off another quarry who will put the prices up. It’s just supply and demand and it’s as basic as that.” (r3)
Feedback from management during reporting season was consistently positive about the amount of work and how long it is expected to go on for.
We have established ownership positions in companies across areas covering: high strength steel, large tank construction and maintenance, wharf and bridge building, cladding, energy consulting and solar construction. All our companies have sound balance sheets and are well run. We suspect that it is early in this cycle and we will do well over the next few years as “tendering work”, “work in progress”, “pipeline” all convert into strong profit growth and margin expansion.
While NSW and Victoria are strong now, QLD and WA are yet to start their cycle which, at some stage will kick off too.
This is going to be a very strong sector seeing higher revenues and improved margins in the years ahead and we own a handfull of well run, well capitalised businesses across a range of specialties and despite the fund being up over 7% in the last 2 months, we expect to see further gains in the year ahead.