When the herd stampedes in one direction, it usually pays to look at stocks trampled in the wake. Examining sold-off infrastructure stocks, listed property companies and banks has merit as the market goes mad for resources.
BHP Billiton, for example, has rallied 71 per cent from its 52-week low. Rio Tinto is up 66 per cent and Fortescue Metals Group has more than quadrupled from its 2016 low.  Several coal and base metals producers as surging as commodity prices leap.
Capital is rotating out of interest-rate-sensitive stocks into mining and energy companies at breakneck pace. The so-called ‘bond proxies’ are being sold amid expectations of more aggressive tightening for United States interest rates. Sydney Airport has fallen from a 52-week high of $7.62 to $6.09; Transurban is down from $12.66 to $10; and Macquarie Atlas Roads Group has drifted from $6 to $4.53. Several Australian Real Estate Investment Trusts (AREITs) are well off their highs.
The catalyst has been Donald Trump’s ascension in November to US presidential-elect. The market is convinced that Trump’s muted US$1 trillion infrastructure spending plan over 10 years will boost commodities demand and stimulate the US economy. That’s good for resource stocks and building materials suppliers, such as James Hardie Industries and Boral; and bad for defensive income-stocks that are relatively less attractive as rates rise. The great ‘yield trade’ looks like coming to abrupt end after years of gains.
I’m not so sure. The resource rally has gone too far, too fast and commodity bulls are getting ahead of themselves. When billion-dollar miners are rallying like ‘penny dreadful’ stocks and commodity prices are rocketing higher – against the backdrop of a sluggish global economy with many risks – it’s time to be cautious.
A Trump presidency, while positive for the US economy on balance, has many uncertainties. I suspect US Congress will insist his infrastructure plan is revised lower, to minimise increases in US debt. Big infrastructure projects could be years away.
And China, which accounts for half the world’s base-metals demand, has mounting challenges to maintain its high economic growth. To surmise: I don’t see the US economy, inflation or interest rates rising as fast as the market expects. 
As such, high-quality Australian income stocks will look increasingly attractive as their valuations fall, and as interest rates remain low. I wouldn’t give up on the yield trade just yet, though further short-term price losses are likely given current selling momentum.
I outlined a bullish view on Sydney Airport, Transurban Group and Macquarie Atlas Roads Group for The Bull over the past few years. Monopolistic airport and tollroads are fabulous assets and their reliable income appeals.
I went cold on these and other infrastructure stocks mid-year, principally because of valuation reasons. These stocks rallied too far as investors clamoured for yield. An overdue pullback in infrastructure companies came in the past few months. 
Recent falls have pushed Sydney Airport closer to value territory. It’s not quite there yet, but deserves a spot on portfolio watchlists in anticipation of better value in the next few months. 
The airport is enjoying good passenger growth from international airline capacity additions, and initiatives to improve the retail precinct and customer experience are welcome. The boom in inbound Chinese tourism is another tailwind for Sydney Airport.
Chart 1: Sydney AirportSource: The Bull
Transurban also looks interesting after price falls. The Queensland Government recently approved the TQ Logan Enhancement Project – small in the scheme of things for Transurban but another example of how it is benefiting from Federal and State Government initiatives to improve transport infrastructure as populations grow.
Macquarie Equities Research has an outperform recommendation on Transurban and values it at $12.40 a share – just below its 52-week high a few months ago. Morningstar forecasts compound annual growth of 8.5 per cent for Transurban’s distribution, making it a sound portfolio inclusion for long-term income investors. 
Chart 2: Transurban GroupSource: The Bull
Internationally focused toll-road operator Macquarie Atlas Roads Group also looks better value after shedding 24 per cent from its 52-week high appeal. It has interests in toll roads in France, the United States, Germany and the United Kingdom, and has been an excellent performer over the past five years. 
Macquarie Atlas is enjoying solid growth in traffic volumes on most of its roads, and concession extensions on the Autoroutes Paris-Rhin-Rhône (APRR) show the potential to increase earnings on the European roads. 
Six of 10 broking firms that cover Macquarie Atlas Roads have a buy recommendation and four have hold. A median price target of $5.70 suggests the stock is undervalued at the current $4.53.  The lowest price target among brokers for Macquarie Atlas is $4.70.
The market, it seems, has become too bearish on Macquarie Atlas Roads as capital flows from the infrastructure sector to hitch a ride with the commodity bulls. 
I’d prefer monopolistic infrastructure assets over price-taking commodity producers any day of the week – at the right valuation, which should emerge over the next few months, possibly sooner if the resource euphoria continues.
Chart 3: Macquarie Atlas Roads GroupSource: The Bull 

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Tony Featherstone is a former managing editor of BRW, Shares and Personal Investor magazines. The information in this article should not be considered personal advice. The article has been prepared without taking into account your objectives, financial situation or particular needs. Before acting on the information in this article you should consider the appropriateness and accuracy of the information, with regard to your objectives, financial situation and needs. Do further research of your own and/or seek personal financial advice from a licensed adviser before making any financial or investment decisions based on this article. All prices and analysis at November 24, 2016.