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Ahmad Gromov
Ahmad Gromov

Best Infrastructure Stocks To Buy


The stock market is in a very different place now than in November, when President Joe Biden signed a $1.2 trillion infrastructure upgrade bill. The S&P 500 had set a string of all-time highs amid enthusiasm about the global economic recovery from the pandemic. Now the index is nearly 1,000 points below that mark, as inflation bites and investors fear that the Federal Reserve's attempts to rein in rising prices could send the economy into a recession. So far this year the industrials and materials sectors are each down roughly 20% through July 18. "Infrastructure stocks are currently bracing for the impact of high commodity prices, coupled with an increasing interest rate scenario that compresses margins even further," says Uri Gruenbaum, CEO of TipRanks. "A majority of the companies are trading at poor valuations, below their five-year averages, which presents a bargain buying opportunity." In light of those conditions, here is a look at seven infrastructure stocks to consider.




best infrastructure stocks to buy


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Only a fraction of the $1.2 trillion in spending authorized by the infrastructure legislation has been spoken for, Gruenbaum notes. In May, the White House said it had released more than $110 billion to upgrade roads, ports and pipes, and expand high-speed internet. That leaves much more to be spent. "This translates into a massive opportunity for infrastructure companies to gain from the legislation in the future," he says. One of these companies is Martin Marietta, "a leading building materials supplier, providing aggregates including crushed stone, sand and gravel through its network of quarries and distribution yards, which are used in both residential and commercial projects," he says. The stock has lost roughly 30% this year through July 18, but an average of 12-month price targets from eight analysts provided by TipRanks comes in a $408, which would be a 28% gain over July 18's closing price of $314.40.


One of President Joe Biden's highest priorities has finally become reality: a massive infrastructure deal that will usher in more than a trillion dollars in new spending across eight years to improve the nation's roads, bridges, rail, internet, water systems and more.


A quick reminder: Biden's original $2.25 trillion infrastructure proposal would have been the biggest public works program in decades. In the president's own words, it would be "unlike anything we have seen or done since we built the interstate highway system and the space race." But large portions of the proposed bill faced significant hurdles in Congress. For example, there were sections that addressed improvements to the home healthcare system and called for the creation of jobs at "prevailing wages in safe and healthy workspaces" that critics said had little to do with what we might normally consider infrastructure.


The new infrastructure bill, which Biden signed into law Nov. 15, boasts a $1.2 trillion price tag that includes $550 billion in new spending that should be a boon to traditional infrastructure stocks.


Today, we're going to look at 13 of the best infrastructure stocks that should benefit from a spending surge from Washington. This includes many names you'd typically associate with traditional infrastructure, as well as several unorthodox picks that a bill could bolster nonetheless. (We also have you covered if you prefer infrastructure ETFs.)


Vulcan's sales mix is spread roughly evenly between private-sector buyers (primarily residential and nonresidential building construction) and government buyers (primarily highways and building infrastructure). Even without a major spending bill, an expected increase in new home construction would likely be enough to give Vulcan's top line a meaningful boost. But with Uncle Sam looking to open his checkbook, Vulcan is likely looking at years of above-trend growth.


The Biden administration has shown a preference for "buying American," and this should suit infrastructure stocks such as Birmingham, Alabama-based Vulcan Materials just fine. It's as American as apple pie, with more than 360 aggregates facilities scattered across the country. The company has been in business for 64 years and is considered the leader in the industry.


MLM could be among the best infrastructure stocks over the coming months or longer because the story here is very similar to Vulcan Materials. Martin Marietta is a building materials company that specializes in the inputs used in large construction and infrastructure projects. Among other things, it makes crushed sand and gravel products, ready-mixed concrete and asphalt, and paving products and services.


Martin Marietta was heavily up and down over much of the past five years. But in the second half of 2020, the stock finally started to build a trend and broke out of its range. It's now up 45% year-to-date in 2021, and it could have more room to run as the infrastructure funds are spent.


Steel is vital to the development and maintenance of America's infrastructure. Nucor's products have a proven track record in several of our nation's prominent structures, including airports, bridges, dams and waterways. Our wide range of infrastructure products includes plate, rebar, sheet piling, pipe piling, structural steels, guard rails, sign post and grating, to name a few.


Things already are going well enough for Nucor without an expected bonanza in infrastructure spending. The company took the unusual step in February of pre-announcing that it expected its first-quarter earnings to set a company record. It followed that up with record net income in Q2, and then again in Q3. That also bodes well for this Dividend Aristocrat's ability to keep raising its payout.


A list of Wall Street's best infrastructure stocks doesn't really feel complete without Caterpillar (CAT (opens in new tab), $205.88), easily the most iconic maker of construction and mining equipment.


Caterpillar's yellow trucks and machinery are ubiquitous in virtually every construction site across the globe. It makes asphalt pavers, compactors, excavators, pipelayers, backhoes and just about everything else you'd need for a major infrastructure project.


But then, something changed. The shares found a bottom in March of last year and have more than doubled since then. It seems investors figured out early that infrastructure spending would be a major component of any economic recovery plan.


Caterpillar is not a pure play on American infrastructure. If fact, much of the reason for its poor performance in the years leading up to 2020 was weakness in emerging markets, which had previously been a source of strength. But looking ahead, Caterpillar's exposure to emerging markets should be considered a positive once again. The U.S. is certainly not the only country that will be looking to spend its way back to economic health.


Deere (DE (opens in new tab), $355.20) is known best as a maker of tractors and other heavy-duty farm equipment. But the company does a lot more than that. It's also a major producer of construction and forestry equipment, and specifically the equipment used in earthmoving and roadbuilding.


This isn't as farfetched as it sounds. Charging stations do not necessarily have to be built to accommodate high traffic like gas stations, and generally have less maintenance to worry about. You can build a small charging station in an office garage or mall parking lot. You can simply add them to existing infrastructure.


Some $7.5 billion in the infrastructure bill would be enough to deliver about half of Biden's original pledge, or roughly 250,000 charging stations. Still, this massive build-out should directly benefit companies such as ChargePoint Holdings (CHPT (opens in new tab), $24.69).


Apart from the mail truck contract, Oshkosh would be an interest infrastructure play for its other businesses as well. OSK builds specialty trucks, including everything from heavy military vehicles to firetrucks. But many of its products are used in heavy construction projects. Oshkosh makes cement mixers, truck mounted cranes, and "cherry pickers" and other hydraulic lifting systems.


If you're bullish on copper, then you're bullish on infrastructure stocks such as Freeport-McMoRan (FCX (opens in new tab), $37.04). As for FCX specifically, it's one of the world's largest and best-run copper miners.


Together with its sister company Brookfield Infrastructure Partners (BIP (opens in new tab)), BIPC is one of the largest diversified infrastructure stocks in the world, with operations spanning utilities, transportation, energy and even data infrastructure. (Brookfield Infrastructure Corporation was formed specifically to give investors a way to invest in the company without having to own BIP's limited partner units, which can be cumbersome at tax time.)


BIPC is not a pure play on American infrastructure by any stretch of the imagination. Its operations are global. But a rising tide lifts all boats, and a major jump in infrastructure spending in the United States should cause a boom in infrastructure assets across the globe.


This is hardly a traditional infrastructure stock. And even without a nickel of infrastructure spending bill money, Crown Castle would be an intriguing long-term play on mobile data usage. But the potential for government largess makes CCI all the more appealing.


Between 2013 and 2019, Eaton's stock price essentially went nowhere. But as plays on green energy started to heat up in 2020, ETN's share price followed. With the market's focus now shifting to longer-term infrastructure plays, Eaton's run of outperformance could be just beginning.


Per its investment mandate, PAVE "seeks to invest in companies that stand to benefit from a potential increase in infrastructure activity in the United States," and in raw materials, heavy equipment and construction in particular.


"We expect new and retrofitted physical infrastructure as well as clean energy infrastructure to require extensive raw materials including aluminum, for construction and transportation; cement, a key ingredient for making concrete; copper, for electrification; and lithium, for energy storage," Global X Research Analyst Andrew Little says. "Further downstream, companies exposed to upgrading physical infrastructure and building out clean energy capacity are likely to benefit from heightened investment, including those involved in construction and engineering, the production of heavy equipment, and manufacturing components in the CleanTech value chain." 041b061a72


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