Now, I bet alot of people are probably thinking “what does build your way out of a recession mean?”. Well, the best way to get out of a recession is to get people working. And what is the best way to get people working? By building something. Governments love to spend money, we all do. But during a recession is when there are no rules or guidelines and governments have free range on our tax dollars to do what they need to in order to kick-start the economy. Is right now the best time to start that even though we aren’t out of the woods yet? I don’t think that at this point we really have any choice.
When it comes to getting people back to work and governments needing to build something the best thing an investor can do is look into the construction and engineering sector. They really go hand in hand. But I wouldn’t look into just any part of construction, you need to look into companies that are really doing BIG things. Things like building roads, bridges, apartment buildings and houses. This creates even more jobs and stimulus by also creating work in lumber, concrete, electrical, heavy equipment and transportation.
That is also just the construction side of it. What about the engineering side? Its not as easy as saying “hey, lets just put a road there” or “yah, we can build a bridge over that river”. It takes a lot of time with processes, figuring out the environmental impact, getting permits, figuring out the impact of travel and if its even possible. The jobs of the engineering firms even go far beyond all of that as well. They also have to figure out how to create buildings themselves. Thats why a few of the companies I talk about are world wide and world famous on a higher level.
When it comes to the construction and engineering sector by far WSP Global(WSP) stands above everyone else. They have been at the top of my watch list for a while and their figures truly say why. They offer professional services with consulting and engineering and it helps that they are practically global. They were for sure not impermeable to the covid-19 global pandemic but they have already recovered and are trending back up nicely. Last year they went on an acquisition frenzy across the world to strengthen their grasp on the industry all while keeping their numbers in check. The only thing that concerns me is that their P/E ratio is a little high so I personally feel that they are a little overvalued. Though their dividend payout ratio is very good at only 55%, especially for a big company like that. I feel that they are very appealing and would be a great diverse addition to any portfolio.
WSP GLOBAL(WSP)- $8.99 Billion Market Cap, 2.24 EPS, 37.7 P/E, Dividend Yield 1.77% and Dividend Payout Ratio 55%.
The next company I want to talk about is Aecon Group(ARE). They are a construction and infrastructure development company involved in both the private and public sector and is mainly based across Canada. They currently have about 20 projects on the go right now across the country which is a really good sign for the company. They also have a diverse range of projects on the go including a Wastewater Treatment Plant in BC, The Gordie Howe International Bridge going from Windsor Ontario to Detroit Michigan, the Wade International Airport Redevelopment in St George’s Bermuda and the Darlington Nuclear Refurbishment in Clarington Ontario to name a few. I feel that with their ongoing projects and the growth of the company their numbers reflect the strength of the company.
Aecon Group(ARE)- $907 Million Market Cap, 1.12 EPS, 14.65 P/E, Dividend Yield 4.22% and Dividend Payout Ratio 52%.
Now I would like to talk about North American Construction Group LTD(NOA) who is mainly in western Canada and is involved in Mining, resource development, Industrial and heavy construction. They have been severely hit by the Covid-19 Global Pandemic and are having a tough time recovering. This is mainly due to their involvement in the mining, oil and gas sector. At the same time though I feel that they are somewhat undervalued just by looking at their numbers. The fact that they also have such a low dividend payout ratio and a low dividend is also pretty good for their business especially in times like this. I would keep a close eye on these guys because once they start to pick up again and get more business they could start to move back up quickly.
North American Construction Group LTD(NOA)- $216.4 Million Market Cap, 1.23 EPS, 5.81 P/E, Dividend Yield 1.83% and Dividend Payout Ratio 8%.
The Last company I would like to talk about is one that is infamous around Canada. The one and only SNC-Lavalin Group Inc(SNC). Please don’t roast me because i’m strictly going off their numbers and facts of business haha. They are an engineering and construction company that is involved in mining, oil & gas, Power and infrastructure. They currently have about 16 projects on the go right now including the Grand Renewable wind project, the McGill University Health Centre-Glen Campus, the Darlington Nuclear Generating Station and the New Champlain Bridge Corridor Project. The main reason I would stay away from them is mostly because of all their scandals and negative publicity but their numbers are somewhat impressive which is why I had to add them to the list.
SNC-Lavalin Group Inc(SNC)- $3.94 Billion Market Cap, 1.87 EPS, 14.11 P/E, Dividend Yield 0.36% and Dividend Payout Ratio 8%.
As far as I can tell, these are all fairly safe options for decent growth. I wouldn’t really get into this sector though if you want any type of dividend, its mostly just very beat down right now but I feel will make for good comebacks in the future. WSP Global is my favorite here but I feel that Aecon Group is a bit of an underdog. If things can turn around and they can get extra busy there is no reason they should see reasonable growth in the future. Especially with more shifts into the renewable sector they could very easily see an increase in business.
That is all for today and remember everyone, invest in yourself first.