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3 Top Infrastructure Stocks to Watch in February

By Matthew DiLallo - Feb 4, 2020 at 10:18AM

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This trio of infrastructure operators is likely to provide investors with key updates this month.

Several infrastructure stocks have made big moves over the past year, making them less appealing buys these days. However, just because an investor missed out on a rally doesn't mean he or she should completely forget about a stock. That's because sell-offs can come out of nowhere, making once intriguing stocks more interesting again. This ever-present possibility of a timely buying opportunity is why investors should always keep an updated watchlist.

With that in mind, three infrastructure-related stocks to watch this month are Brookfield Infrastructure Partners (BIP 1.54%)TerraForm Power (TERP), and ONEOK (OKE 3.85%). All three could deliver some market-moving news this Feburary, making them worth watching closely.

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Keep an eye on an upcoming report

Brookfield Infrastructure Partners is coming off a monster year. Units of the infrastructure partnership surged 44.8% in 2019, powered by strong organic growth and several needle-moving acquisitions. Add in its high-yielding dividend, and the company's total return was an eye-popping 51.4% last year.

That rally has continued in 2020, as Brookfield's price has risen another 9%. Because of its surge over the past 13 months, it's no longer the compelling buy it was to start last year.

One factor that has helped power the company's big move is its recent acquisitions in the data infrastructure sector. The company, however, hit a snag on one of those deals, as a rival infrastructure fund is trying to outbid it to acquire Cincinnati Bell (CBB). That unnamed bidder has reportedly offered Cincinnati Bell shareholders a 14% premium to Brookfield's price. Now Brookfield either must boost its bid or walk away.

Investors will probably learn what Brookfield plans to do later this month, when it reports its fourth-quarter results. If they don't like what's in that report, Brookfield could start cooling off. That might eventually bring it back into a compelling range to buy, which is why the company is a good one to watch this month.  

Look for clues on what it might do

TerraForm Power, meanwhile, finds itself at the opposite end of an acquisition proposal. The owner of renewable power infrastructure received a merger offer last month from majority owner Brookfield Renewable Partners (BEP 0.77%), which is the renewable-focused sibling of Brookfield Infrastructure.

TerraForm formed a special committee to review the proposal, which valued it at an 11% premium to its closing price before Brookfield made the offer. While it's not yet clear what it will do, investors are likely to get some resolution this month, possibly this week, when Brookfield Renewable reports its fourth-quarter results. 

If TerraForm accepts Brookfield's offer, then investors will eventually own shares of that larger company. If not, then it could seek a higher bid -- from Brookfield or a third party -- or remain independent. That uncertain outcome makes it an intriguing infrastructure stock to watch this month.

See if the acceleration is still on track

Shares of energy midstream infrastructure operator ONEOK soared 40% last year, making it one of the best-performing energy stocks in the S&P 500. One of the main fuels of the pipeline company's rally is the upcoming completion of several major expansion projects. In ONEOK's view, they'll give it the fuel to deliver more than 20% earnings growth this year.

Investors will see if that's still the case later this month, when the company reports its fourth-quarter results. As long as ONEOK remains on track with its outlook, then shares could have further to run. However, if it hits a speed bump, then the stock could decline, which, under the right circumstances, might provide investors with a good buying opportunity. 

Lots to keep an eye on this month

Several infrastructure stocks will report their fourth-quarter results this month as well as give investors a glimpse of what's ahead. That means their shares could be quite volatile, which might provide investors with an opportunity to buy. And that's why they should put this trio on their watchlist just in case they get another chance to add one of these companies to their portfolio at a more attractive price.

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Stocks Mentioned

Brookfield Infrastructure Partners L.P. Stock Quote
Brookfield Infrastructure Partners L.P.
BIP
$37.66 (1.54%) $0.57
ONEOK, Inc. Stock Quote
ONEOK, Inc.
OKE
$56.67 (3.85%) $2.10
TerraForm Power Stock Quote
TerraForm Power
TERP
Cincinnati Bell Inc. Stock Quote
Cincinnati Bell Inc.
CBB
Brookfield Renewable Partners L.P. Stock Quote
Brookfield Renewable Partners L.P.
BEP
$35.33 (0.77%) $0.27

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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