Image Source: Mastec.com

When I started investing several years ago I decided to focus on specific areas that I thought would grow rather than take the broad based, generalist approach that many do. The areas I chose are agriculture, oil and gas, home building and healthcare.

Oil and gas pipelaying activities are the reason MasTec (NYSE:MTZ) joined my portfolio but as I learned more about the company I found it also plays an important, albeit hidden, "connectivity" role in my other chosen areas of agriculture, home building and healthcare. More detailed information can be found on the company's website. These activities are headed: Renewable Energy, Electric Power, Oil/Gas, Water/Sewer/Civil, Government, Technology, Communications.

The connectivity with my other investment areas - agriculture, home building and healthcare - are obvious as they all use the necessary basics such as power, water and sewerage but less obvious are those at the leading edge of technology in the rapidly expanding communications sector and that is the part of MasTec's business that sets it apart from most, maybe all, other infrastructure companies.

For example, agriculture is becoming more automated with lighting and heating of undercover crops being remotely monitored and controlled as is indoor and outdoor irrigation. Farm machinery uses navigation and other aids that may soon render human drivers redundant.

Within home building many homes are being fitted with intelligent systems that we can control remotely from our smart phones.

In healthcare, robotic surgery can be conducted by a specialist physician who does not even have to be in the same country as the patient being operated on. Intuitive Surgical (NASDAQ:ISRG) is the world leader in this technology that is barely 20 years old.

These are but a tiny sampling of the myriad developments in the way we live using communications systems that MasTec may have a role in connecting.

While there may be others, I know of no other company with such a broad range of expertise spanning many infrastructure necessities and that can also connect those very different infrastructures as technology develops in the future. And that includes the age old basic necessities such as water and sewerage, the supply and treatment of which is becoming ever more technically advanced.

Looking at two others in infrastructure such as Primoris Services (NASDAQ:PRIM) and Granite Construction (NYSE:GVA) to get comparisons one sees superior performance at MasTec that I believe will continue.

A sampling includes:

5 year EPS growth: MTZ +7.4%; PRIM -15%; GVA +1.6%

5 year sales growth: MTZ +38%; PRIM +24%; GVA +21%

5 year share price growth: MTZ +160%; PRIM +52%; GVA +87%

MasTec's ROE is also superior at 13% compared to PRIM's 5.4% and GVA's 5.8% yet on a PE - ttm - basis MasTec appears underpriced at 26. PRIM is 44 and GVA 37.

The main differentiating factor that I see in MasTec, and the reason I favour it most, is its expertise in Communications. Everything we do and all that is done for us is becoming more and more connected in what some are already calling the Connected Age. The foundations for this can be found in the development of the internet in the 1960s that was followed soon after by the personal computer and the computer mouse. In the 1980s the use of wireless frequencies became less regulated and taken out of the hands of monopolistic fixed line telephone companies and broadcasters that in some parts of the world were government owned. Satellite communications developed rapidly as did the use of fibre optic cables. Then came social media and this budding new age rolled into the 21st century.

This has spawned the building of new forms of infrastructure around the world such as data centres. I own Equinix (NASDAQ:EQIX) and it together with others like it have to be connected.

It has also spawned new dangers as terrorists, home grown law breakers and many others enemies of our society seek to use the Connected Age to bypass traditional barriers with the consequence that government spending is increasing rapidly into new means of military defence and policing. This is very hi-tech and MasTec is at the forefront of installing infrastructure for this.

In a new age such as this it is impossible to connect today with the future in terms of numbers with any accuracy so only imprecise words can be indicators for now. American Towers (NYSE:AMT), one of the world's largest owners of communications towers, has such a word on its website to describe demand growth for its services - "exploding" - and it is investing heavily in expanding its connectivity network to meet that exploding demand growth.

That word cannot be used for demand for the age old basics such as water, gas, electric power etc. However, there has been many years of neglect and massive investment in renewal and expansion is long overdue. If President Trump's infrastructure spending ideas get off the ground then those parts of MasTec will take off with that too.

Since it is difficult to know if and when that might happen I like the fact that much of MasTec's work will be financed by the private sector. Several hundred millions of dollars of oil and gas pipeline construction may now go ahead under the Trump administration, including the long delayed XL pipeline. Many utilities are expanding into solar and wind and that all needs connections into the power grid system. Duke Energy is one with large investment plans.

All this and more is private sector funded and if tax reform gets agreed by politicians in Washington, DC, that might include tax incentives for an even faster rate of private sector infrastructure investment growth. Some of that could come from the estimated $2 trillion in cash held overseas by US companies to avoid US taxation payable if brought home under existing laws.

CONCLUSIONS

MasTec's share price in the 12 months to the beginning of February, 2017, went up by 167% making it one of my best performers. Analysts reckon on a price of around $50 per share by year end, up around 20% from the closing price on April 14, 2017, of $41.45. There are plenty of ingredients in the potential for a higher price but I would rather stay on the conservative side at this early time in the year so I will not try to outguess the analysts. MasTec's cash flow is positive and the balance sheet is sound with no short term debt. I also like the fact that the company founders still head up the company and are shareholders too.

I have not seen much written on MasTec and maybe it is a bit of a hidden gem that readers of this article will like as much as I do.

MasTec is a leading US infrastructure building company that is well positioned for excellent growth as new technologies and new power generation sources expand in the US and as decades of neglect of existing infrastructure is reversed with long overdue investment.

Within those opportunities I believe that MasTec's communications activities will be the outperformer and thus it will enable MasTec to outperform peer companies too. In earlier times we have had the Dark Ages, the Renaissance and the Industrial Age. I believe the 21st Century will become known as the Connected Age and Mastec is well positioned to be part of that.