Despite the contentious rancor and partisan noise about what President Joe Biden’s administration would look like, the ride itself has been rather mundane. Based on talking points from the left and right, it appears Biden frustrates much of Washington for ultimately doing very little. However, a landmark national investment could change this political dynamic and potentially bolster infrastructure stocks.
While high-profile events such as rejoining the Paris Agreement are made for cable news drama, substantively, there hasn’t been much to be excited or upset about. However, the Bipartisan Infrastructure Deal will have serious implications. The bill is a $1.2 trillion initiative to implement Biden’s “Build Back Better” campaign promise and addresses:
- Clean water
- Universal broadband
- Clean power
- Remediation of legacy pollution
- Efforts to address climate change
To be fair, this ambitious plan will not be easy. While the current version of the deal was settled on by a bipartisan group of senators, Republicans and Democrats can have trouble seeing eye to eye. For instance, a recent Reuters report indicated that partisan squabbles erupted during negotiations. Still, the conflict hasn’t deterred President Biden. He recently traveled to Lehigh Valley, Pennsylvania to raise support for the buildout initiative.
Further, while many of us are happy to have some semblance of normalcy return, the reality is that the economic recovery has been disjointed. Possibly the best way to address the growing wealth gap is for the federal government to modernize our underlying networks. As the bill makes its way through Congress, keep an eye on these seven infrastructure stocks:
- Vulcan Materials Company (NYSE:VMC)
- Mueller Water Products (NYSE:MWA)
- Caterpillar (NYSE:CAT)
- Crown Castle International (NYSE:CCI)
- Alcoa (NYSE:AA)
- Olin Corporation (NYSE:OLN)
- Albemarle (NYSE:ALB)
Before you jump on this trade, note that the bill was only finalized on Aug. 1. The proposal still has to maneuver its way through an evenly split Senate and a contentious House, where some Democrats are not happy about the negotiated terms. However, the necessity of a buildout could win politicians over and boost these infrastructure stocks.
Infrastructure Stocks: Vulcan Materials Company (VMC)
As this country’s largest producer of construction aggregates (crushed stone, sand and gravel) and a major producer of aggregates-based materials, no discussion of infrastructure stocks is complete without Vulcan Materials. Basically, VMC stock puts the build in “Build Back Better.”
Not surprisingly, Vulcan Materials has enjoyed strong support from investors. Over the trailing year, shares are up almost 54%. On a year-to-date (YTD) basis, VMC stock has already gained nearly 22%. This compares favorably to the benchmark exchange-traded fund SPDR S&P 500 ETF Trust (NYSEARCA:SPY), which is up 34% over the year and 17% YTD.
Granted, betting on infrastructure stocks is no surefire bet. As I mentioned earlier, the proposal must still go through the rest of the Senate and the House. And the divide isn’t just based on interparty issues, but intraparty disagreements as well.
However, a report from The Hill revealed that most American voters support the infrastructure bill. That would leave opposing politicians who are up for reelection in a pickle. Besides, Vulcan is a critical investment, so you almost can’t go wrong here.
Mueller Water Products (MWA)
Over the last several weeks, mainstream media reports have been hammering home the message of America’s water crisis. For instance, The New York Times reported that water levels at Lake Powell and Lake Mead dropped to historic lows amid an ongoing drought. This is incredibly problematic considering they are two of the nation’s largest reservoirs.
Sure enough, improving clean water infrastructure is one of the top priorities for this White House. In a roundabout way, this bolsters the case for Mueller, which offers solutions for industrial and commercial water and gas infrastructure systems.
What makes Mueller a particularly intriguing stock is Echologics, its water infrastructure diagnostic-focused brand. Its technologies are geared towards water loss management, pipe condition assessment and leak detection.
Admittedly, addressing a large-scale lack of water will probably require incredible technological advancements we don’t have right now — such as an economically viable way to desalinate ocean water. But what we can do is make effective use of our present-day resources. Therefore, investors should consider MWA shares for their portfolio of infrastructure stocks.
Infrastructure Stocks: Caterpillar (CAT)
One of the most bizarre things I’ve heard from former President Donald Trump was his puzzling argument against Japan-based Caterpillar competitor Komatsu (OTCMKTS:KMTUY).
In an MSNBC interview in June 2015, Trump stated, “People are buying Komatsu tractors instead of Caterpillar tractors. I’m telling you, we’re in trouble.” At a Republican debate he reiterated his claims, alleging the de-valued yen was preventing sales of Caterpillar tractors.
Perhaps the biggest irony, though, is that while Trump trumpeted Caterpillar, CAT stock didn’t perform well throughout most of his tenure. Adding insult to injury, CAT shares instead responded well to Biden’s electoral win. As of Aug. 2, shares are up 13% YTD.
To be fair, CAT stock probably would have gone up irrespective of who won the 2020 election. Other demand channels — such as housing — have jumped higher throughout the Covid-19 pandemic. Thus, CAT stock may be a name you can trust over the long haul.
Crown Castle International (CCI)
The Biden administration is aggressively pushing for stronger connectivity infrastructure, making Crown Castle International a no-brainer.
Granted, you could potentially generate more profit from individual wagers on the industry. But CCI shares are perfect for conservative investors because they’re a broader play on infrastructure stocks. Rather than betting on which team wins the competition, CCI stock is about selling tickets to the game — and those tickets will be in high demand.
According to its website, Crown Castle has more than 25 years of experience with owning and operating network assets. Additionally, the company controls more than 40,000 towers and has approximately 80,000 small cells on air or under contract. With the rollout of 5G and other digital innovations such as cloud computing, Crown Castle has never been more relevant.
Most importantly, taking the lead in 5G is a top priority for our rival nations, especially China. The race to control critical technologies has no political affiliation. And given that China currently ranks unfavorably within the international community, the U.S. is unlikely to shelve its 5G efforts anytime soon. Therefore, CCI stock is a worthwhile infrastructure buy.
Infrastructure Stocks: Alcoa (AA)
Alcoa benefitted from the Covid-19 pandemic, but its stock was not looking pretty when the trade war between the U.S. and China got underway. As a Bloomberg report from September 2019 stated:
“When aluminum demand last contracted during the financial crisis and unwanted metal started flooding into warehouses, it took more than a decade to work through the glut. Now, the market is bracing for another sharp increase in inventories as demand growth grinds to a halt.
Aluminum has tumbled to a two-and-a-half-year low as slowing global growth and the U.S.-China trade war hurt demand for the metal used in airplanes, automobiles and beer cans.”
Today, we have the opposite situation. Shortages and inflationary pressures are bolstering the aluminum market. Suddenly, AA stock is looking hot.
Over the trailing year, Alcoa shares skyrocketed 204%. On a YTD basis, AA stock is up 68%. Better yet, the underlying political conditions are supporting infrastructure stocks like Alcoa. Watch this stock closely, as its financial profile has improved since the worst of the pandemic last year.
Olin Corporation (OLIN)
Olin Corporation is what I would call a two-fer opportunity. First, the company’s chemical manufacturing business — specifically its chlor alkali products and vinyls — and epoxy tech make it a relevant yet underappreciated infrastructure stock.
For instance, the Biden White House wants to invest in renewable energy technologies such as wind turbines. But every year, these systems undergo operations under intense environments. Olin’s epoxy products and services keep wind energy blades running perfectly.
If that angle doesn’t work out, then OLN stock has another card to play: ammunition. Under the Olin brand is Winchester, one of the most recognized names in the ammunition business. Purchases of firearms are up, and supply chain disruptions have dramatically increased the cost of ammo.
Today, ammo is well worth its weight in gold — check out OLN’s performance as evidence. On a YTD basis, shares are up nearly 90% and they appear poised to drive even higher.
Infrastructure Stocks: Albemarle (ALB)
One of the top priorities of the Biden administration — if not the top priority — is the advancement of clean transportation networks. Naturally, this bodes well for electric vehicle (EV) manufacturers and, more to the point, EV infrastructure stocks.
With so much interest in this space, there are plenty of options among EV charging station providers — you probably know the names I’m thinking about. However, I’m getting skeptical about this industry. EVs cater to higher-income folks and are far too expensive for average households — unless you want to sacrifice features like a wheel or usable space.
In this context, Albemarle offers a great compromise. Known for its lithium production business, it plays a significant role in the EV rollout. In fact, earlier this year, management stated that it will double lithium production at its Silver Peak facility in Nevada by 2025.
Admittedly, investors should be aware of the impact of lithium mining on the environment. This contradicts the popular ethos of environmental, social and governance (ESG) investing. Nevertheless, on a net basis, Albemarle arguably does more good than harm.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.
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