Index Shows Companies Are Building Again

Looking for a reason to be bullish on construction materials and equipment stocks? Take a look at the Architecture Billings Index (ABI) published by the American Institute of Architects.

The ABI registered a score of 52 in November, up over 6 percent from the October level of 48.7, the index’s highest reading since December 2007. More importantly, all regions were expanding except for the West, which remains bogged down in the muck of a popped real estate bubble. Though activity in the region was down from the previous month, the strongest region was the Northeast.

The chart shows the ABI bottomed in January 2009 and has experienced a resurgence during the next 23 months.

The ABI is one of the best tools we have to measure non-residential construction activity, such as the development of offices, warehouses, strip malls and apartments but there’s typically a 9- to 12-month lag between movements in the ABI and construction spending.

If the expansion continues, this could be a positive for both construction materials companies, such as U.S. Steel, and for equipment makers, like Caterpillar (CAT). Many in the latter category have been feasting on emerging market growth in places like China while the U.S. recovered and 2011 may be the time for that growth to come home.

The following securities mentioned in the article were held by one or more of U.S. Global Investors family of funds as of September 30, 2010: Caterpillar.

About Frank Holmes 264 Articles

Affiliation: U.S. Global Investors

Frank Holmes is CEO and chief investment officer of U.S. Global Investors, Inc., which manages a diversified family of mutual funds and hedge funds specializing in natural resources, emerging markets and infrastructure.

The company’s funds have earned more than two dozen Lipper Fund Awards and certificates since 2000. The Global Resources Fund (PSPFX) was Lipper’s top-performing global natural resources fund in 2010. In 2009, the World Precious Minerals Fund (UNWPX) was Lipper’s top-performing gold fund, the second time in four years for that achievement. In addition, both funds received 2007 and 2008 Lipper Fund Awards as the best overall funds in their respective categories.

Mr. Holmes was 2006 mining fund manager of the year for Mining Journal, a leading publication for the global resources industry, and he is co-author of “The Goldwatcher: Demystifying Gold Investing.”

He is also an advisor to the International Crisis Group, which works to resolve global conflict, and the William J. Clinton Foundation on sustainable development in nations with resource-based economies.

Mr. Holmes is a much-sought-after conference speaker and a regular commentator on financial television. He has been profiled by Fortune, Barron’s, The Financial Times and other publications.

Visit: U.S. Global Investors

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