Top Picks 2020: Great Lakes Dredge & Dock (GLDD)

01/17/2020 5:00 am EST

Focus: INDUSTRIALS

Tony Daltorio

Editor, Investors Alley Premium Digest

Our $18 trillion economy relies on a vast network of infrastructure from roads and bridges to freight rail and ports to electrical grids, suggests Tony Daltorio, editor of Growth Stock Confidential

However, many of the systems currently in place were built decades ago and have deteriorated. That was evidenced in the 2017 'report card' from the American Society of Civil Engineers (ASCE), which gave our nation's infrastructure an overall grade of D+.

That means the condition of U.S. infrastructure is “mostly below standard,” exhibiting “significant deterioration,” with a “strong risk of failure.”

The ASCE estimates that there is a total “infrastructure gap” of nearly $1.5 trillion needed by 2025. It added that the U.S. needed to invest $4.59 trillion by 2025 to bring the grade up to an adequate B-.

One specific area that needs upgrading is our ports. As ships get bigger, ports will need to make navigation channels deeper and also there is a need to dredge those channels to keep them open. That's where Great Lakes Dredge & Dock (GLDD) comes in.

The company (founded in 1890) is North America’s dredging industry leader and the largest provider of marine dredging. It owns and operates a diverse dredging fleet composed of numerous specialized maritime vessels and operates marine yards in five locations nationwide.

The company has maintained its U.S. market share (46% market share on average for the past three years) for literally decades. And there are definite 'triggers' for future growth for the company, including the growing use of 'post-Panamax' vessels.

This will require the deepening of U.S. ports along the East and Gulf Coasts in order to accommodate these deeper draft vessels. And thanks to LNG exports, several port development projects are underway. Both will factor in to GLDD's continued growth.

(Editor's note: Last year, Tony Daltorio chose Innovative Industrial Properties (IIPR) as his Top Pick; it has risen 66%. He explains, "The marijuana industry has developed much more slowly than expected, forcing some firms to sell their real estate to fund operations. Buying up some of this real estate on the cheap has been IIPR. As the pot industry does develop, this REIT will be there waiting to rent out all this space.")

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