Road construction workers at work on improving infrastructure.
Source: Getty Images

Infrastructure Stocks Set To Benefit From Biden’s $1 Trillion Infrastructure Plan

Mohit Oberoi, CFA - Author
By

Oct. 1 2021, Updated 9:40 a.m. ET

The U.S. Senate has passed the bipartisan infrastructure bill, which is now heading to the House. The bill has proposed a multiyear investment plan to boost the country's infrastructure. Investors are watching the news closely, as some stocks are bound to benefit from Biden's infrastructure plan.

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While Trump delivered on several of his reform agenda items, infrastructure investments were notably missing. With the $1 trillion plan, the Biden administration has a chance to upgrade the country's physical and digital infrastructure.

What's included in Biden's infrastructure plan

The bill aims to improve the nation’s roads, bridges, broadband, cybersecurity, EV (electric vehicle) charging networks, and electric grids. The bill also entails investments toward clean drinking water.

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The bill's $1 trillion in funding will be secured from several avenues, including through cryptocurrency tax. "There's been detours and everything else, but this will do a whole lot of good for America," said Senate Majority Leader Chuck Schumer. Biden also thanked lawmakers after the bill was passed. "I want to thank those senators who worked so hard to bring this agreement together. I know it wasn't easy," said Biden at the White House.

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joe biden infrastructure plan
Source: getty

Significant projects and overhauls are planned in a broad range of industries that build and repair outdated systems and expand broadband access.

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The stocks poised to benefit from the infrastructure plan

With the influx of funding, many companies stand to benefit. Some stocks have already started climbing.

Caterpillar

Demand for Caterpillar's equipment could rise as infrastructure investments boost demand for miners and mining equipment. The stock is also a play on global markets' continued recovery, thanks to the company's geographically diversified revenue.

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caterpillar equipment
Source: caterpillar

Caterpillar stock, which has come off its 2021 highs, looks attractive at its current price. Its NTM (next-12-month) PE multiple is 17.7x and it has a healthy dividend yield of 2.3 percent. Analysts' average price target for Caterpillar implies a 22.5 percent upside over the next 12 months.

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Vulcan Materials

The largest aggregate producer in the U.S., Vulcan Materials specializes in providing crushed stone, sand, and gravel to produce asphalt and concrete. The company gets three-quarters of its revenue from aggregate sales to both private- and public-sector buyers.

vulcan materials
Source: getty
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Vulcan has already seen a rerating amid the infrastructure news, and its NTM PE multiple of 30.1x is above its five-year average of 28.5x. However, that higher valuation looks reasonable considering the significant boost Biden's infrastructure plan is set to give Vulcan.

United Rentals

United Rentals is one of the country's largest construction equipment rental companies and seems like a good investment given the influx of infrastructure funding over the next few years.

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united rentals
Source: united rentals

Split into two sectors—general rentals and trench, power, and fluid solutions—United Rentals covers a swath of needs. General rentals include backhoes, forklifts, earthmoving equipment, and boom lifts, whereas trench, power, and fluid solutions comprise equipment designed for underground work and fluid treatment—the kind needed for water and underground broadband projects.

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Nucor

Steel is set to be an in-demand commodity throughout the infrastructure plan, and Nucor, the largest domestic steelmaker, is poised to be busy. It has high exposure to the nonresidential construction sector, as it's a leading rebar supplier in the country. Rebar is used in the construction of highways and bridges. Nucor is also investing in new plants that are set to come online just in time to meet the increased steel demand.

nucor steel
Source: getty
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Even excluding Biden's infrastructure plan, Nucor's earnings have been booming thanks to U.S. steel prices being at record highs. The stock looks cheap, and its NTM PE multiple is 3.9x. Nucor has been among the S&P 500's top gainers in 2021, and it might stay strong in the medium to long term.

Crowne Castle International

With millions of Americans working from home during the COVID-19 pandemic, the need for fast and reliable internet has never been higher. That and the emergence of 5G technology has made modern communications infrastructure a major focus of Biden's infrastructure plan.

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crowne castle
Source: Getty Images

Crowne Castle International is one of the largest wireless tower real estate investment trusts (REITs). Even without the government spending bill, CCI has been thriving as wireless providers race to dominate the 5G landscape.

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Brookfield Infrastructure

One of the most diversified infrastructure stocks globally, Brookfield Infrastructure spans many sectors, including transportation, utilities, transportation, and data infrastructure. Although it's a global company, Brookfield's vast utility network in the U.S. may be enough to lift its stock.

brookfield infrastructure corp
Source: brookfield infrastructure corp.
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ChargePoint

EV charging companies such as ChargePoint could be among the biggest beneficiaries of Biden's infrastructure plan. As U.S. and global economies pivot from gasoline cars to EVs, charging infrastructure is needed. The infrastructure bill has vowed billions of dollars toward building it.

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ChargePoint, which has one of the largest EV charging networks in North America and Europe, offers DCFC (direct-current fast charging). The company holds over 70 percent of North America's networked level 2 charging market. CHPT stock is far below its 52-week high but could recover as Biden's infrastructure plan takes shape.

The Global X U.S. Infrastructure Development ETF (PAVE)

If investing in individual companies doesn’t fit your strategy, a more diversified approach may do the trick, such as the Global X U.S. Infrastructure Development ETF. The fund, which holds about 100 infrastructure stocks, has a $3.7 billion market cap and an expense ratio of 0.47 percent.

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global infrastructure
Source: getty

With about 70 percent of PAVE invested in industrial companies, 22 percent in materials, and a sizable amount in technology and utilities, the ETF is another good way to play the Biden infrastructure bill.

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