By: Tim Fortier — November 10, 2021
Build Your Portfolio with These Infrastructure Plays
"This Bipartisan Infrastructure Deal will rebuild America’s roads, bridges, and rails, expand access to clean drinking water, ensure every American has access to high-speed internet, tackle the climate crisis, advance environmental justice, and invest in communities that have too often been left behind.
"The legislation will help ease inflationary pressures and strengthen supply chains by making long-overdue improvements for our nation’s ports, airports, rail, and roads.
"It will drive the creation of good-paying union jobs and grow the economy sustainably and equitably so that everyone gets ahead for decades to come.
With the President’s Build Back Framework, it will add on average 1.5 million jobs per year for the next 10 years."
-The White House"
With such a wide range of issues and projects addressed within the Infrastructure Bill including bridges, roads, water, clean energy, and broadband, the passing of legislation will undoubtedly impact many different sectors and sub-sectors within the US economy.
It is the largest such investment in more than a generation. It will raise federal infrastructure spending to its highest share of GDP since the early 1980s.
Today, I will focus on a few different ways that investors could increase exposure to stocks that may benefit from this new bill.
Exchanged Traded Funds
While a broad-based ETF such as the cap-weighted Industrial Select Sector SPDR Fund (XLI) will certainly provide exposure to many of the companies that will benefit, it is not my first choice due to its inclusion of aerospace and defense holdings such as BA, RTN, and LMT.
Instead, I prefer a more narrow focused ETF such as the iShares U.S. Infrastructure ETF (IFRA)
Designed to provide exposure to US infrastructure companies that could benefit from a potential increase in domestic infrastructure activities, the fund further narrows the holdings into two broad categories: (1) owners and operators, such as railroads and utilities, and (2) enablers, such as materials and construction companies.
The fund holds 150 issues on an equal-weight basis including many smaller companies that could benefit from the recent broadening out of the market performance across all capitalizations.
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Technically, the fund is breaking out to new all-time highs after spending several months consolidating.
When looking for individual stock names, I established a screen looking for positive trending names exhibiting good relative strength, and that were not too far extended.
Here are a couple of ideas to consider.
Evoqua Water Tech Corp, (AQUA) is a holding company that engages in the provision of water treatment solutions.
Technically, the stock displays increasing relative strength and a steadily rising trend. Shares have advanced 66% YTD.
One of the top-performing stocks within the iShares Infrastructure ETF is MYR Group Inc.(MYRG). With roots dating to 1891, this company provides large-scale electrical construction services throughout the US and western Canada.
Historically, the company has delivered some of the largest electrical infrastructure, notable commercial and industrial, and renewable energy projects.
Institutional ownership has been steadily increasing with 390 funds owning shares last December, a number that has increased to 475. Shares of MYRG are up 87% YTD.
Now that the hard part — getting the bill through Congress and the House of Representatives — is one signature away, it's likely some time will pass before we actually feel any impact from it.
Regardless of how long all the repairs and new infrastructure take to build, the companies mentioned above are positioned perfectly to profit once a hammer drives the first nail.
Have a great day!
Editor, True Market Insiders