Infrastructure Stocks to Watch Now

Coming on the heels of the successful passage of a $1.9 trillion COVID-19 relief package is President Joe Biden’s $3 trillion infrastructure bill, which aims to reform social programs, create jobs, build a green electric grid, expand internet access, and more. 

The White House recently announced that Biden will separate his sprawling plan to upgrade the nation’s infrastructure into two separate pieces that he will unveil weeks apart.  

White House press secretary Jen Psaki said on Fox New Sunday that Biden will unveil the first part of his plan, focusing on items like rebuilding roads and railways on Wednesday.  The second part of Biden’s plan will include child-care and health-care reforms –aspects of social infrastructure– and will be released in “just a couple of weeks,” she said. 

Documents reviewed by The Times indicated that the proposal could include $1 trillion devoted largely to building and repairing physical infrastructure, with a focus on fighting climate change.  The newspaper reported that some of Biden’s advisords believe that dividing the package and pushing for the roads-and-bridges proposal first may make it easier to gain support from Republicans.  

Psaki also alluded to expectations around Republicans support of the proposal in an interview with Fox News’ Chris Wallace, “We’re not quite at the legislative strategy yet, Chris, but I will say that I don’t think Republicans in this country think we should be 13th in the world as it relates to infrastructure.”

Here are three stocks to watch ahead of Wednesday’s announcement.  

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Martin Marietta Materials (MLM) is engaged principally in the building materials business, including aggregates, cement, ready mixed concrete and asphalt and paving product lines.  The aggregates product line is sold and shipped from a network of more than 270 quarries and distribution facilities in 26 states, Canada, the Bahamas and the Caribbean Islands.  The cement, ready mixed concrete and asphalt and paving product lines are located in strategic, vertically integrated markets, predominantly Texas and Colorado.

 Building materials are used for construction of highways and other infrastructure projects, and in the non-residential and residential construction industries.  Aggregates and cement products are also used in the railroad, agricultural, utility and environmental industries.  The Company also has a Magnesia Specialties business that manufactures and markets magnesia-based chemical products used in industrial, agricultural, and environmental applications, and dolomitic lime.

MLM share price is up 22% for the year and some analysts agree that the stock has more room to run.  Of 20 analysts offering recommendations for MLM, 6 rate the stock a Buy and 14 rate it a Hold.

Eaton (ETN) doesn’t generate power, and it’s not a pure play on green energy like some of the other best “Biden policy stocks.”  But, as a major supplier of electrical components and systems, it is absolutely an indirect play on this fast-growing industry, and one that is likely to thrive irrespective of the inevitable booms and busts we’ll see in the coming years.  The wind and solar farms popping up around the country need to be incorporated into the national grid, and that’s precisely what Eaton does.

Eaton is a power management company with a 109-year history. It has been listed on the NYSE for 97 years and has paid a dividend every year since 1923. That’s remarkable consistency in an industry that has gone through incredible changes over the past century, and that’s a major selling point of this stock.

Many of the high-flying stocks in alternative energy might or might not be around a decade from now.  This is still very much the wild west.  But Eaton almost certainly will be, supplying the survivors with power systems and software and integrating them into the grid.

ETN currently sports a 2.19% dividend yield.  There are 17 Buy ratings for the stock, 6 Hold ratings and one Sell rating. 

If a boom in infrastructure spending is on the horizon, then it’s hard to avoid Caterpillar (CAT), the world’s leading maker of construction and mining equipment.  The company also makes diesel and natural gas engines, industrial gas turbines and diesel-electric locomotives.  Caterpillar is a cyclical business that tends to boom and bust to the tune of the broader economy. 

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Caterpillar has traded in a range for the past few years, unable to get much traction.  Weakness in emerging markets really took the wind out of the stock’s sails.

Something interesting happened in 2020, however.  Yes, Caterpillar tanked along with the rest of the market in February and March.  But it not only recouped its losses in the rally that followed, it actually broke out of a three-year trading range.

Caterpillar is not purely a play on American infrastructure, of course.  In fact, over half of its sales are now generated outside North America — which has helped its performance throughout the pandemic. Caterpillar continues to expand its manufacturing capabilities and product offerings in China, which is one of its hottest growth regions right now.  The company has a strong global presence and should benefit from a recovery in emerging markets as well.

Even without the infrastructure bill, Caterpillar is forecasting that 2021 will be a year of growth as dealer inventories begin to rise and the company prepares for an upswing in the business cycle. 

With over 25 years of consecutive annual dividend raises, Caterpillar has proved its resilience through difficult market cycles.  Shares of Caterpillar are near an all-time high as Wall Street buckles in for what could be record revenue and earnings in the coming years.  With a 1.9% dividend yield and plenty of growth prospects, Caterpillar‘s stock is one to watch. Considering its shares have risen over 140% in the past year (and Caterpillar has yet to book the great numbers everyone thinks it will), it may be best to take a wait-and-see approach to make sure Caterpillar can justify its high valuation.