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Foundation of fallacies Add to ...

Infrastructure stocks were touted as ideal investments to take advantage of stimulus spending when the recession first hit, but their performance has lagged the broader S&P/TSX index in the past year.

Reasons for their weakness include:

Private sector projects dwarf public spending

Although the government stepped in with stimulus funds, private sector projects have historically accounted for 60 to 70 per cent of all business.

Delays, delays, delays

The government took its time doling out contracts and the construction industry is notorious for delays in getting approvals and completing work.

Recession contracts had lower margins

When proposed projects died during the downturn, more firms bid for fewer contracts, lowering margins on those awarded.

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