Clean-up
Crumbling infrastructure, uninhabitable buildings and dirty and contaminated areas—particularly with deadly mold—headline an enormous clean-up effort. Waste management and environmental companies are often tasked with these jobs. In fact, one large waste company, Waste Management Inc., discussed the revenue boost from “certain destructive weather conditions that tend to occur in the second half of the year, such as hurricanes” in its 2016 annual report.
The VanEck Vectors Environmental Services ETF (EVX) tracks the NYSE Arca Environmental Services Index which invests in companies that “may benefit from the global increase in demand for consumer waste disposal, removal and storage of industrial by-products, and the management of associated resources.”
This concentrated fund holds approximately 20 securities. In a recent report that reviewed the fund’s top holdings, Stifel analyst Michael Hoffman noted that the top two holdings, Waste Management Inc. and Waste Connections, as well as two other large holdings, U.S. Ecology and Clean Harbors, will likely benefit from the clean-up of storm debris and potential oil spills.
“When there is extensive flooding in areas with widespread industrial infrastructure, particularly when it is oil & gas related like refining, petrochemical and chemical manufacturing, there are likely to be spill-like clean-ups once the storm surge has passed and the water recedes,” writes Hoffman in his August 28th note.
EVX’s year-to-date return of 14.45 percent seems to have an interesting correlation with the arrival of hurricanes Harvey and Irma, as almost two-thirds of this return came between August 18th and September 18th according to Van Eck product manager, Michael Cohick.
Rebuild
Repairing the damaged and dilapidated infrastructure is a difficult, costly and lengthy process. Many companies that participate in infrastructure upgrades or build-outs will lead these rebuilding efforts, and unlike the slow process to receive Federal funding through the passage of infrastructure bills, FEMA funds could be deployed relatively quickly to help rebuild critical infrastructure.
The Global X US Infrastructure Development ETF (PAVE) tracks the INDXX U.S. Infrastructure Development Index which is “designed to provide access to infrastructure activity in the United States. This includes those companies that provide raw materials and heavy equipment as well as physical construction and engineering.”
PAVE was created around the thesis that America’s infrastructure is in disrepair. Receiving a grade of D+ from the American Society of Civil Engineers together with the decline in infrastructure spending of 0.2% per year over the last 15 years, has prompted calls for the Federal government and local municipalities to upgrade infrastructure around the country.