Background
On Wednesday March 31st, President Joe Biden unveiled his over $2 trillion infrastructure and economic relief bill. The plan, to be funded by a corporate tax rate hike from 21% to 28%, proposes to invest $621 billion into transportation infrastructure from bridges, roads, and public transport to ports, airports and electric vehicle development, $400 billion for elderly and disabled Americans, $300 billion into drinking water projects, broadband access expansion, and electric grids’ upgrades.
As part of the plan, over $300 billion would also be allocated to affordable housing and constructing and upgrading schools. Moreover, $580 billion would be invested in domestic manufacturing, research and development, and job training endeavours. The infrastructure proposal is coming on the heels of the $1.9 trillion coronavirus relief bill passed earlier in the month. It is expected to promote transportation and clean energy, while creating millions of manufacturing jobs along the way.
Although, most likely, it will not be passed until summer, now is the best time for you to understand its potential economic effects and the opportunities it might present for you as an investor. In light of that, we expect it to positively impact the following stocks:
Vulcan Materials (NASDAQ: VMC)
If there is any stock expected to tremendously benefit from the Biden’s infrastructure proposal, the American Jobs Plan, it is Vulcan Materials, the country’s largest producer of construction materials. Whether for maintenance or complete rebuilding, the company always benefits as its services are roughly equally split between private and government buyers. Thus, even without the infrastructure bill, Vulcar Materials would still be a safe choice.
For 2020 financial year, the company reported $4.86 billion in revenue, a 1% decline, and $1.324 billion in EBITDA. It recorded a 2% gain in profit nevertheless. The stock has a 52-week range of $176.34/$88.60 and closed the trading hours of April 16 at $175.67. Presently, it has a dividend yield of 0.86%.
Nucor (NASDAQ: NUE)
Base and industrial metals are expected to play significant roles in the post-COVID economy – all thanks to China and, if it eventually sees the light of the day, the Biden’s infrastructure bill. It can be forecasted that the recovering demand to be underpinned by these two would be of benefit to many metals and mining companies such as Nucor Corporation, the largest steelmaker in North America.
Nucor has a 52-week range of $82.76/$34.72 and a current dividend yield of 2.07% having increased its dividend for 48 years. Over the past 5 years, on average, its earnings per share has grown by 13.67%. Over the same period, revenue has also risen by 4.14% every year. Indeed, if there is a stock that will receive a big boost from the proposed infrastructure spending, it is this.
Crown Castle (NASDAQ: CCI)
A real estate investment trust (REIT) specializing in the provision of shared communications infrastructure, Crown Castle is one of the companies that perfectly fit into President Biden’s proposed infrastructure plan. The company helps public institutions and private businesses meet their connectivity demands by providing critical network upgrades and other infrastructure solutions.
Within its industry, the stock is competitively priced, having closed the previous trading session at $179.62. It has a 52-week range of $180.00/$146.15. Castle Crown has returned at least 130% over the past five years and has grown its earnings per share (EPS) at 10% each year. Its current dividend yield is 3%.
Tesla (NASDAQ: TSLA)
Tesla is already a well-known name in the electric car and solar and integrated renewable energy solutions space. The company left 2020 with a modest performance. Due to COVID-19 lockdowns, the electric car maker had to suspend production in the spring. But thanks to a soaring demand for Model 3, it still grew vehicle deliveries by 36% for the year. That is expected to grow further by an estimated 85% in 2021.
There are opinions that Tesla’s stock may already be overvalued having surged over 400% in 2020. In fact, an analyst believes that even if the automaker increases its sales at a compounding growth rate of 21% over the next 10 years and cuts down costs, its stock is still bound to decline by at least 14%. Truly, Tesla has grown without regard for fundamentals. However, the future is green, and Tesla is expected to be a leader in it.
And with the special provisions for green energy in the infrastructure proposal, it can only see further growth. So, the current price might not be attainable again. Going forward, Tesla will always be a boon.
Brookfield Infrastructure Corporation and Partners (NASDAQ: BIP)
Is there any infrastructure spending around? Get yourself some Brookfield Infrastructure Corporation. Along with its sister company, Brookfield Infrastructure Partners, a limited partnership that acquires infrastructure assets with low maintenance and high barriers of entry, Brookfield Infrastructure Corporation manages thousands of kilometers of natural gas pipelines, electricity transmission lines, rail, and roads. Although it generates its maximum revenue in Brazil, it also operates in Canada, Australia, Chile, Peru, India, and many other countries.
Brookfield Infrastructure Partners generated $394 million in net income in 2020 – up from $233 million for the year before. For the same year, the company also grew its revenues to $8.85 billion from the $6.597 billion it reported in 2019. Even beyond Biden’s infrastructure bill, a well-documented benefit of buying BIPC’s shares is the fact that it has always strived to be friendly to its investors – with a long-term return on equity (ROE) target of 12% to 15% and annual dividend yield growth of 5% to 9%.
Finally, if you consider that its operations are not limited to the United States alone, you would be hopeful that whatever the direction in which the wind blows, Brookfield Infrastructure Corporation and Partners would always deliver impressive returns.
In addition to these five foremost stocks, other stocks that may also benefit from the Biden’s infrastructure plan are American Water Works (NASDAQ: AWK), ChargePoint (NASDAQ: CHPT), and United Rentals (NASDAQ: URI), the largest heavy-equipment rental company in the world.
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