An analyst for the top-performing infrastructure ETF in the US this year shares 5 stocks set to benefit for years from Biden and Congress’ expected multi-trillion-dollar package

  • President Joe Biden is expected to announce plans for an infrastructure package on Wednesday.
  • Global X infrastructure analyst Andrew Little shared 5 stocks he thinks stand to benefit.
  • The Global X US Infrastructure Development ETF is the sector’s top-performing ETF this year.
  • See more stories on Insider’s business page.

As Congress closed in on passing another COVID-19 relief package earlier this month, Wall Street began to think about what they and President Joe Biden would focus on next: healthcare or infrastructure?

It’s become clear over the last week that the answer to that question is infrastructure. 

Biden is hosting an event in Pittsburgh on Wednesday to pitch his infrastructure plans, and he’s apparently aiming big with a proposed $4 trillion package — $1.4 trillion of which is expected to be earmarked for physical infrastructure.

It’s a prospective deal that presents a high-conviction, long-term opportunity for investors, according to Andrew Little, an analyst for the Global X US Infrastructure Development ETF, which is the top performing fund in the sector this year and has beaten 99% of its peers over the last three years.

One reason is the sheer size of the proposed deal. The fact that infrastructure spending in the US has been below average over the last decade makes it more likely that a large deal is passed, Little said.  

Morgan Stanley

Another reason is because investors mostly haven’t yet priced in the deal, mostly because details surrounding the package are still unknown, and the funds take years to fully disperse, he said. 

“As soon as this goes through, it’s going to take a decade or more to deploy all the capital needed to develop infrastructure because it’s a multi-phase process. Even if some of it’s priced in, it’s not fully,” Little told Insider this week. “I wouldn’t really change my outlook in the long-term in terms of performance being priced in.”

However, he said Biden’s event on Wednesday had the potential to move markets, though some potential details of Biden’s package, like a $650 billion allocation for bridges and roads, have been reported.

It is still unclear when a deal would be passed, but Biden is aiming for this summer. It is also unclear whether the Senate will opt to use the budget reconciliation method — meaning Democrats would only need 50 votes plus Vice President Kamala Harris’ vote to pass it — in the next fiscal year (July or later), like they did for the latest round of COVID-19 stimulus.

More broadly, Little said investors are underestimating the economic impact of an infrastructure deal. It’s projected to create up to 2.5 million jobs by 2024 and boost wages, he said. 

With Little’s strong conviction in the deal being a long-term opportunity for investors, we asked him which firms he likes best in the industry. He shared five, which are detailed below.

5 infrastructure stocks to buy

From a sub-sector and industry perspective, Little said construction, engineering services, materials and composites  — more specifically, concrete and copper — all stand to benefit.

He said Vulcan Materials (VMC) will get a boost from its concrete exposure, and Mueller Industries (MLI) from its exposure to copper. Plus, their high revenue exposure to the US will help them, too. Having “significant” US revenue exposure is in fact a requirement of all the names in the Global X US Infrastructure Development ETF, he said.

For firms in the industrials sector, one that Little likes is Norfolk Southern (NSC), a railroad transportation company. He said tailwinds include that their revenue exposure to the US is over 50%, and that they are in a crucial position for allowing the development of infrastructure.

“They own freight railroads, which really allows for the transportation of raw materials, intermediate products, and finished products and finished goods throughout the United States,” he said.

Another is Rockwell Automation (ROK), a “major player” in industrial automation with hardware and software products, he said.

“When it comes to what’s really important here, it’s going to be the different products and applications that they have when it comes to engineering and construction,” he said. “Some of the hardware they provide that will be immensely useful for constructing next generation US infrastructure.” 

Finally, Little said Jacobs Engineering (J), a construction and engineering firm, will see upside potential from an infrastructure deal.

“They are kind of a next-gen construction services consulting company that works with industrial organizations, general commercial organizations, and the government, too — so that is a somewhat of an attractive aspect of the company,” Little said.

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