President Donald Trump has been putting a great deal of focus on reviving the American economy. So far, he has arguably done a very good job. The big corporate tax cut will permit a lot of companies to hold onto their own money, and other than returning some of that capital to shareholders, it is in those companies’ best interests to reinvest that capital and continue to grow.
There’s also been talk of a large amount of money devoted to fixing and improving our national infrastructure. Personally, I’m not crazy about the government using taxpayer money to tackle these projects. I prefer public-private partnerships, especially with those companies trading on the stock market.
It may not be the best use of government money, but it should lead to enhanced job creation as well as repairing infrastructure that badly needs fixing.
There are number of different companies that may benefit from this kind of work, and I think I found three that have the best odds of winning these government contracts.
Aecom (NYSE:ACM) is a full-service design, engineering, and construction company that operates all over the world. It handles everything from planning, engineering, design, program management and construction management for every type of client.
Not only has ACM completed a recent merger with a top arrival, but it already has a $50-billion backlog of projects waiting to be tackled.
The company has a strong financial position, with $867 million of cash, $3.1 billion of low-cost debt on the books, and yet another billion dollars in unused capacity in its revolver. The company is expecting between $600 million and $800 million in free cash flow this year.
ACM is already trusted by government agencies, as 22% of last year’s revenue came from the federal government, and another 15% from state and local governments. Last year’s revenue was a record $18 billion, and that backlog I mentioned increased 11%. I think ACM is well-positioned to benefit from any kind of infrastructure plan.
There are number of different materials companies that are very interesting in the space. Materials are obviously going to be critical to any kind of an infrastructure plan, whether were talking about cement, asphalt, steel or wood. It’s very difficult to hone in on just one, but I’ll go with Martin Marietta Materials, Inc. (NYSE:MLM).
The company focuses on building materials derived from natural resources, and also supplies aggregates and heavy building materials directly to the construction industry. We’re talking about stuff like stone, gravel, sand, concrete, asphalt, as well as dolomitic lime. It has a fairly strong history in providing materials for residential construction, agriculture, utility and railroads.
The company CEO recently stated:
“We believe the United States is in the midst of a steady and extended construction recovery, and we’re well positioned to benefit from anticipated increased demand…that construction activity could accelerate this year, and as a result, we expect 2018 to be a record year for Martin Marietta.”
So even if there is no big infrastructure bill that comes through Congress, it sounds like the company is well-positioned.
My last selection is not only a play geared toward an infrastructure bill, but also on rising energy prices and a recovering oil services sector.
McDermott International Inc (NYSE:MDR) is focused on the upstream side of the energy sector, providing engineering, design, construction, installation and fabrication of materials. It operates all over the world and has been since 1923. It also delivers both fixed and floating production facilities, installs pipelines, and handles all kinds of underwater systems.
McDermott is a bit of a value play, coming off a small loss in 2015, generating a small profit in 2016, then leaping to a $178-million profit last year. It managed to survive lower oil prices because it aggressively paid down its debt. It is also turning its cash flow situation around. This is a riskier play, though, so take note.
Lawrence Meyers is the CEO of PDL Capital, a specialty lender focusing on consumer finance, and is the Manager of The Liberty Portfolio at www.thelibertyportfolio.com. He does not own any stock mentioned. He has 23 years’ experience in the stock market and has written more than 2,000 articles on investing. Lawrence Meyers can be reached at TheLibertyPortfolio@gmail.com.