The Top 3 Infrastructure Stocks to Help Build Your Portfolio

infrastructure stocks - The Top 3 Infrastructure Stocks to Help Build Your Portfolio

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U.S. infrastructure is a slow-motion train wreck, which has generally left many infrastructure stocks off of investors’ radars lately.

In fact, the American Society of Civil Engineers gave the U.S. a D+ rating as recently as 2017. Additionally, the ASCE estimates that the country needs around $4.5 trillion by 2025 just to repair roads, airports, bridges, dams, schools and more, as I noted in February 2020.

Worse, according to the group, the U.S. is significantly under-invested by $2 trillion.

Between 2003 and 2017, spending on roads, bridges and water systems to name a few, fell by more than 8%, according to the Congressional Budget Office. According to the ASCE, “[t]oday, we only spend 2.5% of our GDP on infrastructure, down from 4.2% in the 1930s.”

The organization expands on the issue further, explaining the following:

“Unfortunately, the real-world impacts of this underinvestment are all around us. Every day, there are 850 water main breaks in North America, a 27% increase over the past six years. The average driver spends $533 annually in extra vehicle repairs and operating costs as a result of poor roadway conditions and insufficient capacity.”

While the U.S. government has been slow to act, there’s hope for improvement.

President Trump, for example signed an executive order to expedite infrastructure investments on June 4, 2020. House Democrats have also rolled out a $500 billion infrastructure bill that would help update our aging transportation system.

With hopeful updates to our antiquated infrastructure, some of the best stocks to consider:

  • Vulcan Materials (NYSE:VMC)
  • Caterpillar (NYSE:CAT)
  • Nucor (NYSE:NUE)

Let’s dive a bit deeper into what makes each of them among the most promising infrastructure stocks to buy now.

Infrastructure Stocks to Buy: Vulcan Materials (VMC)

Infrastructure Stocks to Buy: Vulcan Materials (VMC)

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Vulcan Materials is one of the companies that produces and sells construction aggregates, asphalt mix and ready-mixed concrete primarily in the U.S. for highways, airports and government buildings.

After pulling back on the coronavirus threat, the stock has exploded from a low of $65.34 to $123. However, with new infrastructure initiatives being launched, I believe VMC stock could revisit its prior high of $148 shortly. Plus, demand for concrete is expected to grow 7% this year to $4 billion, according to Concrete Construction.

In Vulcan Materials’ most recent quarter, the company saw $1.05 billion in revenues, as compared to $996 million, year over year. Net earnings were $60 million with EBITDA of $201 million.

In addition, according to Tom Hill, chairman and CEO:

“The impact from the COVID-19 global pandemic continues to evolve quickly, and it is too early to estimate accurately the full-year impact on aggregates demand. Because we have been designated as an essential business, shipment activity today remains relatively strong across many of our markets as customers execute on their backlog of projects. However, we expect some project timelines will be modified as every market adjusts to economic disruptions.”

Whatever happens in light of the novel coronavirus crises, I have faith that VMC stock will ultimately be a stand out among other infrastructure stocks in the months ahead.

Caterpillar Inc. (CAT)

Caterpillar Inc. (CAT)

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No infrastructure job is complete without Caterpillar, the world’s largest construction manufacturer. After collapsing to a low of $86.70, CAT stock has only begun to rebound, last trading at $122 a share.

With a likely infrastructure boom soon underway, I believe the Caterpillar stock could easily test $162, near-term.

With potential multi-billion-dollar projects, the CAT stock can quickly capitalize with its diversified business model, including transportation, construction and natural resources. If we see progress with President Trump’s new executive order to expedite infrastructure, and the House Democrats’ $500 billion plan to update our transportation systems, there’s no doubt Caterpillar could be a prime beneficiary.

Nucor (NUE)

Nucor (NUE)

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Nucor is the largest steel producer in the U.S., and could be another substantial beneficiary of potential infrastructure programs. Better yet, Goldman Sachs recently upgraded NUE stock to the equivalent of a buy rating from a hold rating.

“We believe that high-quality, well capitalized steel companies that boast healthy balance sheet liquidity, lower levels of debt, and flexibility in terms of capital investment are among the best stocks to own,” said Goldman Sachs analyst Matthew Korn.

While the coronavirus threat put a dent in steel demand, new infrastructure programs could quickly change that. Plus, by 2021, The World Steel Association says steel demand could recover to 1,717 million metric tons (a 3.8% increase year over year).

Ian Cooper, an contributor, has been analyzing stocks and options for web-based advisories since 1999. As of this writing, he did not hold a position in any of the aforementioned securities.

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