President Joe Biden’s administration is formulating a $1.2 trillion infrastructure bill to upgrade key infrastructure in the nation. Its approval would offer a significant upside to infrastructure stocks because it would drive investment in the sector. What are the best infrastructure stocks to buy now?
The infrastructure bill is called the Infrastructure Investment and Jobs Act (IIJA). The bill spans 2,702 pages and the vote could take place in the coming days. The bill focuses on improving the nation’s bridges, roads, water supply systems, and high-speed internet, among other key infrastructures.
Biden’s infrastructure bill
The $1.2 trillion infrastructure bill is the biggest public works legislation in decades. The bill includes $550 billion in new spending over the next five years for crucial infrastructure including building roads, rail, EV charging stations, and replacing lead water pipes. The bill is in addition to the previously authorized funding of around $450 billion, which is a significant step toward bolstering the U.S. economy.
Infrastructure stocks to buy now
Certain infrastructure stocks are good for investors to buy now, including:
- Vulcan Materials Company (VMC)
- Caterpillar (CAT)
- Nucor (NUE)
Vulcan is a leading producer of construction aggregates including crushed stone, sand, and gravel. The company is also a major producer of aggregates-based materials like asphalt and cement. Aggregates account for 76 percent of Vulcan's sales and 91 percent of its gross profit. The stock has gained 22 percent YTD and trades at NTM EV-to-sales multiple of 5.1x.
Caterpillar is an infrastructure company that designs, manufactures, and sells construction and mining equipment. The company’s yellow trucks and machinery are found on most construction sites around the world. In the second quarter, Caterpillar’s sales increased by 29 percent YoY to $12.9 billion. The stock has gained 57 percent over the last year and trades at an NTM EV-to-sales multiple of 2.6x.
Nucor is the largest steel producer in the U.S. Rising steel prices boosted the company’s first-quarterly net profit to a record high on 33 percent growth in revenues. Nucor’s offerings would be in high demand with the approval of this bipartisan infrastructure bill. The company boasts a strong balance sheet and has increased dividends each year for the last 48 consecutive years. The stock has gained 145 percent over the last year and trades at an NTM EV-to-sales multiple of 0.9x.
Best infrastructure ETFs
The Global X U.S. Infrastructure Development ETF (PAVE) is my top pick since it’s a pure-play infrastructure ETF. PAVE is the largest infrastructure ETF and it holds a wide range of stocks, which gives you the broadest exposure to the sector. The ETF held 99 stocks as of Aug. 2 including Nucor, Eaton, Deere & Co., and Vulcan Materials. Given that diversification and a very low expense ratio of 0.47 percent, PAVE is positioned to deliver good returns after Biden's infrastructure bill gets approved.
The other infrastructure ETFs include the iShares U.S. Infrastructure ETF (IFRA) and the Alerian Energy Infrastructure ETF (ENFR).
Infrastructure stocks are a good investment.
The bill will likely pass, which means you will be hearing bulldozers roaring, jackhammers clattering, and cranes beeping soon. Infrastructure companies are critical for economic development and growth because they construct and repair the backbones of modern cities. Now’s the time to buy infrastructure stocks to capitalize on this megatrend.