President Joe Biden introduced his American Jobs Plan on March 31. The plan outlines $2.251 trillion of estimated spending to improve the country and jobs for Americans. It is divided into four major sectors: infrastructure at home, transportation infrastructure, research and development (R&D), workforce development and manufacturing, and the caretaking economy. As a result, infrastructure stocks are set to take off.
The effects of the announcement are sure to reverberate through the markets. That means certain sectors and stocks therein are going to appreciate in price. It’s very clear that finding the strongest operators in these sectors will be a surefire bet to chase near-certain gains. However, the plan will only become law if it passes later this summer. For that reason, it currently makes sense to invest in those sectors most likely to survive partisan rhetoric.
So, let’s look at some of those infrastructure stocks set to benefit from President Biden’s American Jobs Plan.
- ChargePoint Holdings (NYSE:CHPT)
- Cleveland-Cliffs (NYSE:CLF)
- Vulcan Materials (NYSE:VMC)
- Brookfield Infrastructure Partners (NYSE:BIP)
- American Tower REIT (NYSE:AMT)
- Union Pacific (NYSE:UNP)
- Deere & Co. (NYSE:DE)
Infrastructure Stocks: ChargePoint Holdings (CHPT)
The American Jobs Plan includes $621 billion dedicated to transportation infrastructure. $174 billion of that is earmarked for electric vehicles (EVs). This will serve as a massive tailwind for ChargePoint Holdings.
ChargePoint Holdings is an EV charging network company that has been around since 2007. It has recently gone public. The recent tech and EV selloff pulled share prices down, but the long-term picture remains bright. And Biden’s commitment to accelerate the EV infrastructure buildout serves as an immediate catalyst.
ChargePoint has been building out the EV infrastructure charging network since 2007. Thus, it is a pioneer in the EV space. The other pioneering American name in the space, Tesla (NASDAQ:TSLA), didn’t release its first vehicle until 2008.
ChargePoint currently boasts a network of over 132,000 places to charge vehicles in North America and Europe. Additionally, it has 7X more market share than its next closest competitor in networked level 2 charging.
CHPT stock only began trading on the New York Stock Exchange on March 1, following its initial public offering (IPO) with Switchback Energy. 2020 fiscal year revenues increased to $146.5 million, from $144.5 million in 2019. The company is still experiencing losses and will continue to do so. It remains a long-term play, but the short-term catalyst is there.
My next pick on this list of infrastructure stocks is CLF. The proposed infrastructure buildout is going to require lots of steel. Cleveland-Cliffs mines ore and manufactures just about every kind of steel imaginable. Biden’s plan calls for $650 billion in spending on infrastructure at home and $621 billion of spending on transportation infrastructure. Therefore, investors can easily understand the opportunity for a leading steelmaker like Cleveland-Cliffs.
Investors already keen to make a play on steel manufacturing may be considering a few other names, including Nucor (NYSE:NUE) and ArcelorMittal (NYSE:MT). However, there’s good reason to consider Cleveland-Cliffs over either of them. Firstly, Nucor is already above its pre-pandemic price, and it looks like investors have already rotated into it as a cyclical play. All of its growth seems to be priced into current share prices.
Cleveland-Cliffs acquired substantially all of ArcelorMittal’s U.S. operations back in December. CLF stock has been trending upward since, and it looks like it should continue on the infrastructure plan news.
CLF’s stock appreciation has outpaced its peers over the past three years. The company also acquired AK steel in 2020. The acquisitions have transformed Cleveland-Cliffs into the largest flat-rolled steel manufacturer in North America.
Vulcan Materials (VMC)
Vulcan Materials is the United States’ largest producer of construction aggregates. This includes crushed stone, sand, gravel, asphalt and concrete. Under Biden’s plan, $115 billion has been earmarked for improving highways, bridges and roads.
Vulcan operations serve 19 of the 25 fastest growing U.S. markets. Moreover, the company operates across what is essentially the southern half of the continental U.S. Growth in this geography’s population, household and employment is projected to far outpace the areas Vulcan Materials doesn’t operate in. Therefore, Vulcan Materials has a strong ability to capture a higher portion of that $115 billion in spending.
For the full year 2020, Vulcan Materials recorded $4.86 billion in revenue, a record EBITDA of $1.324 billion and earnings of $585 million. The company focused on improved efficiency during the pandemic year. Revenues declined by 1%, yet profits increased 2%.
Vulcan Materials CEO Tom Hill noted gains in construction employment as a positive catalyst of late for the company. This infrastructure plan only strengthens the case for investing in VMC stock.
Brookfield Infrastructure Partners (BIP)
Brookfield Infrastructure Partners manages a portfolio of infrastructure assets, making it a natural pick for this list of infrastructure stocks. The company’s holdings include assets across utilities, transport, energy and data infrastructure. Therefore, the company has wide exposure to many of the sectors Biden’s plan intends to address.
One thing that I appreciate about Brookfield Infrastructure Partners is that the company sets out clear expectations for potential investors. It states that its objective is “to generate a long-term return of 12-15% on equity and provide sustainable distributions for unitholders while targeting annual distribution growth of 5-9%.”
The company has grown over the past year on a net income basis. Net income in 2020 reached $394 million, up from $233 million in the year prior. Perhaps as important, the company saw a large increase in revenues during 2020. Brookfield Infrastructure Partners recorded $8.885 billion in 2020 revenues. In 2019, that figure was a much more modest $6.597 billion.
So the company itself looks to be in strong position, regardless of the positive catalyst provided by President Biden’s American Jobs Plan. The company is rated overweight by Wall Street analysts, and its Q4 earnings-per-share (EPS) earnings beat along with all of the other positives make it a strong play right now.
American Tower REIT (AMT)
American Tower REIT (real estate investment trust) is another stock that Wall Street is fond of at present. Eight analysts rate it a buy, while only one rates it a hold. The company builds and operates cell phone towers across the globe. I like this stock as a broader play on the buildout of 5G in the United States. It just makes sense to invest in it as a play on a different narrative in 5G than network competition. AMT stock recently dropped below $200 and has rebounded sharply in the past three weeks to around $240 per share.
American Tower REIT released Q4 and full-year earnings back on Feb. 25. Although revenue, net income and EBITDA all increased for the full year, AMT stock pitched downward for the next week and a half. Perhaps this was attributable to the fact that it missed quarterly EPS expectations. In any case, AMT shares are up again and more than retraced the prior losses.
Biden’s plan calls for a $100 billion investment into high-speed broadband. Although his plan hasn’t been enacted as law, broadband will certainly be less contentious than some green initiatives. American Tower REIT should benefit along with other infrastructure stocks.
Union Pacific (UNP)
Union Pacific is a company and a stock with a few overarching catalysts currently. Firstly, Union Pacific is a strong economic reopening play. Freight is a highly cyclical portion of the economy, and investors are rotating in. Some investors may worry that gains are already priced in. It doesn’t appear so. UNP stock is still below analyst target prices by roughly $10.
That tangent aside, let’s get back to the overarching catalysts in Union Pacific’s favor. Secondly, Biden’s Jobs for America Plan includes $80 billion of investment toward passenger and freight rail. Both scenarios bode well for Union Pacific and owners of its stock.
Union Pacific also has a few strong metrics backing it as a business. Its net margin, return on equity and return on assets are all above the 90th percentile of peers in the transportation industry. Further, Union Pacific is broadly value-creating with a return on capital that exceeds its cost of capital.
Deere & Co. (DE)
Last on this list of infrastructure stocks is Deere & Co. stock. DE stock was flat through all of 2018 and 2019. Shares pretty much hovered around $155, give or take five or 10 bucks. However, DE stock has shot skyward over the past year. Shares are up 233% from the pandemic trough and a still very respectable 127% from pre-pandemic prices.
Some readers will wonder if that means that most of the getting has been gotten. Analyst target prices indicate there’s room left for growth on average. Optimistic estimates suggest there’s another $50-60 until DE shares max out.
Although many readers will associate Deere & Co. with lawn mowers and smaller tractors, the company also manufactures a lot of construction equipment. The obvious catalyst here is that Biden’s investment into infrastructure requires the purchase and utilization of construction equipment.
Deere has drawn so much interest lately because it has been performing well. In Q1 of 2021, revenues and sales increased by 19% to $9.112 billion year-over-year. Investors welcomed that news, of course. But where the company really shined was in profits. Net income increased to $1.224 billion, up 137% from $517 million. The company has figured out how to increase efficiency within its operations. Its goal to reach 15% margins by 2022 is underpinned by smarter machines and maximizing vehicle up time. The results have been positive so far, and infrastructure investments will only help.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Alex Sirois is a freelance contributor to InvestorPlace whose personal stock investing style is focused on long-term, buy-and-hold, wealth-building stock picks. Having worked in several industries from e-commerce to translation to education and utilizing his MBA from George Washington University, he brings a diverse set of skills through which he filters his writing.”