Decarbonization and digitalization present multi-trillion dollar investment opportunities over the coming decades. The United States needs to invest an estimated $4 trillion to decarbonize its economy by 2050, and the world needs to invest $1 trillion in data infrastructure over the next decade to support digitalization. need to spend. These megatrends can drive explosive growth for companies focused on them.
NextEra Energy (NYSE:Nee) and brookfield infrastructure (NYSE:BIPC)(NYSE:BIP) They are leaders in those fields. Nevertheless, the company’s stock is currently trading more than 30% below its recent highs due to concerns that rising interest rates could hurt the company’s growth. However, that headwind is expected to weaken this year as the U.S. Federal Reserve lowers interest rates, which could push down stock prices. This short-term catalyst, combined with a focus on long-term megatrends, could provide investors with explosive total returns over the next few years. That’s why these stocks stand out as some of the top stocks to buy this month.
Built into a powerful megatrend
NextEra Energy is Renewable energy And we’ve built a state-of-the-art wind and solar energy platform. The company has leveraged its expertise to invest in adjacent sectors to further strengthen its growth engine. The company is an emerging leader in battery storage operations that complement renewable energy assets. NextEra also develops transmission lines that transmit renewable energy to the grid.Furthermore, we have started investing in green hydrogenan emission-free fuel produced with renewable energy.
The company’s early foray into renewable energy helped fuel double-digit adjusted earnings and dividend per share growth over the past decade. This has given the company the power to generate strong total returns (12.2% per annum). NextEra expects adjusted earnings to increase more than 9% per share from his 2021 baseline by 2026. Increase dividends by approximately 10% annually over the period.. Rapid growth is likely to continue into 2026 and beyond, given the expected acceleration in demand for renewable energy to power data centres, electric vehicles and green hydrogen production.
Despite its solid growth outlook, NextEra Energy is currently trading at its lowest valuation in years. The company’s stock price fell more than 30% as investors sold high-yield stocks as interest rates rose.the Expected PER This ratio is around 17, well below the 25+ that was sold in 2022. It’s also much cheaper than the broader market.of S&P500The forward P/E ratio is almost 23 times, but Nasdaq 100is over 30 years old.
With interest rates trending lower, NextEra could return to higher valuation multiples. Add to this the upside of explosive growth in renewable energy, and this could generate strong total returns.
A super cheap way to ride the digitalization megatrend
Brookfield Infrastructure is trading at an even lower price. This global infrastructure operator is selling for just over 12 times his operating capital (FFO) Earnings per share have increased as the stock price has fallen more than 30% from its peak. This is very cheap for a company that grew its FFO per share by 10% last year, and is expected to maintain this rate going forward.
One of the factors driving Brookfield’s bullish growth outlook is the increased focus on digitalization megatrends. The company has built a state-of-the-art data infrastructure platform featuring communications towers, fiber optic networks, data centers, and semiconductor manufacturing.
Brookfield is investing heavily in data centers, seeing it as a “once-in-a-generation” investment opportunity that leverages catalysts such as cloud computing and AI. The company invested in three data center operators last year, significantly expanding its global platform. Brookfield is also investing in multiple data center developments and plans to more than triple its capacity by 2026.
The company’s increasing focus on digitalization could lead to solid gross margins. Brookfield has delivered nearly 13% annualized total returns over the past decade, and given its cheap valuation and strong growth drivers, it has the potential to generate even better returns in the future.
Potential for explosive total returns
NextEra Energy and Brookfield Infrastructure have delivered superior total returns over the past decade by focusing on investing in strong global growth trends. Their thematic investment approach should continue to pay off as the megatrends of decarbonization and digitalization gain momentum in the coming years. These drivers could drive solid growth and explosive total returns, especially given the current cheap valuations. That’s why NextEra and Brookfield stand out as great stocks to buy this month.
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matt dilalo He works for Brookfield Infrastructure, Brookfield Infrastructure Partners, and NextEra Energy. The Motley Fool owns a position in NextEra Energy and recommends NextEra Energy. The Motley Fool recommends Brookfield Infrastructure Partners. The Motley Fool has Disclosure policy.
2 explosive stocks to buy in February Originally published by The Motley Fool
