Prior to 2020, arguably the general political consensus was that former President Donald Trump would easily win reelection. Though he has always had rough edges that made him a polarizing figure, President Trump got things done. In turn, his no-nonsense approach to high-level negotiations represented a narrative boon for infrastructure stocks, what with the America First message and all.
Unfortunately for the Trump White House, the novel coronavirus quickly spread like wildfire, devastating virtually every habitable part of the globe. In my view, Trump could have used the public health crisis in a constructive manner, similar to how former President George W. Bush — a generally unlikable figure — united Americans following the Sept. 11 attacks. But that’s never been Trump’s M.O., which seemingly threatened infrastructure stocks.
With his failed bid for reelection, the fear was that the America First ethos would fade with the transitioning of a new administration. At least on paper, though, those fears were not justified, with now-President Joe Biden promising to restore the U.S. back to greatness. After taking office, the Democrats introduced a trillion-dollar bill to rebuild the nation’s deteriorating roads and bridges, among other initiatives. Naturally, this is huge for infrastructure stocks.
However, the tumultuous pullout of U.S. troops and personnel from Afghanistan put a massive dent into Biden’s armor, which previously benefitted from simply not being Donald Trump. With the president’s “approval tanking in key House districts,” the White House needs to do something to get the discourse off the recent geopolitical tragedy and toward something positive — and getting back on track with infrastructure stocks will be huge.
Yes, Americans do care about world affairs. At the same time, I think most people here would rather have the federal government advocating for their causes and needs rather than for issues that stand thousands of miles away. Therefore, I expect the current administration to recalibrate and refocus, which should boost these infrastructure stocks.
- Eagle Materials (NYSE:EXP)
- Nucor (NYSE:NUE)
- American Tower (NYSE:AMT)
- Jacobs Engineering Group (NYSE:J)
- Volta (NYSE:VLTA)
- Brookfield Renewable Partners (NYSE:BEP)
- Magellan Midstream Partners (NYSE:MMP)
As I’ve explained in other InvestorPlace articles, no market segment offers a guarantee of upside, especially in this wave of wild speculation. However, no matter what happens politically, infrastructure stocks will maintain their pertinence. Therefore, you have at least one catalyst you can depend on.
Infrastructure Stocks for a PR Reset: Eagle Materials (EXP)
Per a New York Times article in August, the Senate provided overwhelming bipartisan support for the $1 trillion infrastructure bill, a key component of President Biden’s agenda. Even Senator Mitch McConnell, a former staunch ally of President Trump included his name among the yes votes.
However, the bill faces a much more difficult challenge in the House, “where Speaker Nancy Pelosi and a majority of the nearly 100-member Progressive Caucus have said they will not vote on it unless and until the Senate passes a separate, even more ambitious $3.5 trillion social policy bill this fall.”
Still, if the legislature ultimately moves forward on the initiative, you’ll want to keep your eye on infrastructure stocks, particularly concrete players like Eagle Materials. One of the leading manufacturers of basic construction materials, EXP has veritably soared so far this year, gaining 32% since the January opener.
In its fiscal year ending March 31, 2021, Eagle posted revenue of $1.62 billion, up almost 16% from the prior year. Certainly, a green light from the government would spark another rally for EXP stock.
Over on various discussion boards focused on market advice, many pejoratively refer to Mad Money host Jim Cramer as a contrarian indicator. In other words, if Cramer likes a particular equity unit, you should run from it and vice versa.
Personally, I think it’s dangerous to make too many assumptions about TV personalities’ guidance, but if you happen to be a Cramer critic, you may want to take this with a grain of salt. A few weeks ago, the opinionated market celebrity mentioned that technical indicators pointed to certain infrastructure stocks including Nucor having potentially more upside.
Much of the bullishness in the segment comes from news that broke at the time about the Senate approving the infrastructure legislation. It must still pass the House before Biden can sign it into law. But if it does, NUE stands poised to be among the infrastructure stocks to benefit.
Granted, Nucor shares have already jumped nearly 99% since the start of the year. However, the underlying numbers are phenomenal, with the company’s trailing-12-month (TTM) revenue at a hair under $26 billion — a tally that would best annual revenue stats going back to at least 2006.
Infrastructure Stocks for a PR Reset: American Tower (AMT)
Given the shakeup in the telecommunications sector, it’s going to be difficult picking out winners and losers. But what you can be sure about as it relates to your portfolio of infrastructure stocks is that the 5G rollout is vital to both our economy and our national security — something that both Democrats and Republicans can agree on.
In early August, Republican lawmakers put forward an amendment that would include $2.5 billion in funding for installing 5G wireless technologies at facilities administered by the Department of Defense.
Per Fedscoop.com, “Rolling out secure 5G technology across military installations is a core element of the Department of Defense’s plan to create a joined-up battlefield, in which soldiers and military vehicles have access to real-time data.”
As 5G integration is turning out to be a paradigm-shifting development, investors interested in infrastructure stocks should consider American Tower. On a year-to-date basis, ATM shares have gained nearly 32% and there’s nothing to suggest that its longer-term narrative is about to lose steam. On a TTM basis, American Tower’s revenue is at just under $8.6 billion, which would be up 7% from 2020’s impressive tally of $8.04 billion.
Jacobs Engineering Group (J)
A fundamentally speculative wager based on its forward-looking assumptions, investors who are serious about infrastructure stocks should take a look at Jacobs Engineering Group. In recent years, both Democrats and Republicans have warmed to the idea about clean transportation as a means to address climate change. As well, such networks can reduce our dependency on fossil fuels, which is positive from a geopolitical angle.
One way the U.S. can (quite literally) fast track its clean transportation initiative is through high-speed rail networks. If the legislature okays the infrastructure bill, we could see a rising number of states seeking support for high-speed rail, which would favor Jacobs Engineering. Having specialized in the field, with experience planning out these advanced networks in various places like the U.K., China, Saudi Arabia and here at home, Jacobs is potentially in prime position.
Still, it’s a tricky situation because the U.S. has always lagged behind other countries regarding high-speed rail. On the same token, you don’t want to say never. With high-profile incidents stemming from climate change constantly generating headlines, we might see a change of heart.
Infrastructure Stocks for a PR Reset: Volta (VLTA)
Having recently entered into the public market via a business combination with a special purpose acquisition company, Volta is off-the-bat risky for two reasons. First, initial public offerings tend to be unpredictable. Second, IPOs based off reverse mergers with SPACs have been disappointing as a whole.
To be honest, Volta isn’t really boosting the reputation of SPACs. Admittedly it is following a sudden surge in the markets, although this is the first bullish price action that’s occurred since its listing. What was noteworthy — but not in a good way — was that VLTA shares slipped below $9 more than once, indicative of a low-confidence SPAC play.
Nevertheless, if you can stomach the volatility, Volta could make for one of the more intriguing infrastructure stocks because of its underlying business. I covered this company in great detail for Benzinga but Volta serves the burgeoning electric vehicle space with a network of full-service charging stations. The idea here is that the company can maximize revenue-generating opportunities in the charging stations’ real estate through screens showcasing relevant advertising.
Considering that it’s going to take at least half-an-hour for EV drivers to get adequate charge for their vehicles, Volta has an interesting business plan. Surely, it will be even more interesting if the infrastructure bill passes.
Brookfield Renewable Partners (BEP)
Hang around the cesspool of the internet — I like to call it the comments section on articles that Yahoo posts — and you’ll find plenty of accusations that Democrats are nothing but tree huggers (and that’s being polite about it). While the criticisms stick in some circles, the reality is that across the political spectrum, more politicians are concerned about environmental stewardship.
From the most trusted sources in government and academia, climate change is real — and humans are largely the cause of it. More importantly, people are wising up to this circumstance, which means that gaslighting false narratives about the issue won’t have the same impact that it did in prior election cycles.
That’s all good news for Brookfield Renewable Partners, which operates one of the world’s largest publicly traded pure-play renewable power platforms. Featuring an expansive portfolio of facilities in North and South America along with Europe and Asia, Brookfield is a must for those who are seeking infrastructure stocks with a heavy dose of ESG (environmental, social, governance) attributes.
With the Biden administration targeting net-zero emissions by 2050 at the latest, BEP will almost surely play a pivotal role in how we power the world moving forward.
Infrastructure Stocks for a PR Reset: Magellan Midstream Partners (MMP)
Because President Biden and his colleagues have expressly discussed causes related to environmental justice, it might seem odd to put Magellan Midstream Partners in this list of infrastructure stocks. With the administration focused on clean energy, supporting fossil fuels seems anachronistic.
Yet the Colonial Pipeline cyber attack proved a key point: fossil fuels currently move society and the economy. After all, nobody in the administration just let the company fail. Colonial represented a vital component of energy infrastructure in its markets.
In the same vein, Magellan Midstream will be a relevant name, both today and in the many years to come. Part of the reason stems from science — fossil fuels simply have incredible energy density and that’s not something that can be easily replaced. Moreover, the goal of net-zero emissions will require a lengthy transitional period.
Plus, Magellan Midstream levers an important political trump card. If the Democrats move to remove fossil fuels altogether, that will destroy jobs and create a firestorm. They’re not going to do that because they have a tenuous hold on power so Magellan stays, whether people like it or not.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.