There are few things that congressional Republicans and Democrats agree on these days. However, revitalizing America’s crumbling infrastructure may be one of them.
Currently, the United States’ infrastructure is ranked 13th out of all major developed countries and is falling fast. So this past week, the Biden administration proposed a nearly $2 trillion dollar infrastructure package.
The ideas in the infrastructure bill received broad support from the American public.
In addition, a recent study from Georgetown estimated that this bill could create 15 million jobs
Regardless of how we end up paying for this, it looks like one of the largest spending bills in American history will pass in some form this year. It is a massive amount of capital that will flow to certain areas of the U.S. economy, and if retail investors want to take advantage of it, they only have to follow the money.
Here are two areas that could benefit the most from the infrastructure package and two stocks that could see serious resulting growth.
Out of the $2 trillion dollars proposed, nearly one-third will flow to industrials and transportation. Bolstering the nation’s roads, bridges, waterways, and rail lines has become an urgent priority as a matter of safety and national security.
Industrials has already taken over a the new leader of the market, replacing tech stocks from last year. The Industrials sector has seen outstanding growth this year, even outpacing the S&P 500. The new infrastructure bill would deliver a shot in the arm to an already hot sector.
An industrial stock to keep an eye is Caterpillar (CAT).
Caterpillar is the leader in the industrial sector and engages in the manufacturing of construction equipment, diesel and natural gas engines and more. Caterpillar generates around $42 billion in revenue each year and has a healthy balance sheet with an improving debt to asset ratio. They have beaten earnings estimates 3 out of the last 4 years, including soundly trouncing Q4 estimates. They also produce a healthy dividend yield of 4%.
It is almost certain that Caterpillar would be heavily involved in the execution and construction of the infrastructure overhaul.
While not thought of as traditional infrastructure, cloud computing has become a critical component of the U.S. economy. The new infrastructure bill allocates $100 billion as part of a technology investment that could allow nationwide fiber optic internet access. In addition, the investment into cloud computing would help revitalize long outdated sectors such as healthcare.
While countries such as China have spent billions on improved connectivity, this type of spending could give the U.S. a massive advantage in communication and cyber security.
A stock that could be poised to benefit is CISCO (CSCO).
CISCO is engaged in the designing and selling of a range of technologies across networking, security, and the cloud. CISCO’s platforms consist of the technologies of switching, routing, and wireless that are designed to work together to deliver networking capabilities and store data.
CISCO has soundly beaten estimates during the last 4 quarterly earnings. With a healthy profit margin and improving debt to asset ratio, CISCO’s financials make it extremely attractive stock that could benefit greatly from the infrastructure package.
In Summary:
When the government injects this amount of spending in the economy, investors can surely benefit. Simply, follow the money.
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