The United States badly needs to revitalize its infrastructure due to ongoing safety concerns and shifting demographics across the country.
Recently, Democratic leaders have agreed with U.S. President Donald Trump that $2 trillion in spending should be allocated to rebuilding U.S. infrastructure through a bipartisan bill.
While Congress faces gridlock on a variety of other issues with President Trump, an excellent opportunity to make money from this infrastructure bill exists because it could land on his desk later this year...
The massive stimulus project would provide a boost to material industrial companies. However, investors should be careful navigating through hundreds of stocks available to find the best way to invest in American infrastructure.
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To determine which stocks are poised to gain the most from this $2 trillion infrastructure bill, we use a valuation tool that can help us get out in front of the markets...
It's called the Money Morning Stock VQScore™. And it may be the most powerful investing tool on Wall Street. This proprietary algorithm tracks about 1,500 of the most profitable companies and assigns each of them a score based on its likelihood to rally soon.
Stocks that earn a VQScore of 4 or higher are signaling they have "immediate breakout potential."
Today, we found the two best infrastructure stocks to buy should Congress and President Trump pass this $2 trillion bill to repair American roads, bridges, pipelines, and more.
Infrastructure Stocks to Buy, No. 2
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The first infrastructure stock to buy is Nucor Corp. (NYSE: NUE), the largest steel producer in the United States.
If $2 trillion is spent on tunnels, bridges, and pipelines, you can bet that steel will be the most important component of these projects.
Nucor is based in North Carolina, with a solid balance sheet and little concern about debt in the future. The company's debt to equity ratio of 0.42 is significantly lower than its competitors Steel Dynamics Inc. (NASDAQ: STLD) at 0.60 and Commercial Metals Co. (NYSE: CMC) at 0.93.
Despite ongoing tensions with China and concerns about U.S. steel manufacturing, Nucor has benefited from higher steel prices that have improved margins.
At its current price of $56.50 per share, the stock is a downright bargain...
Nucor trades at a price/earnings (P/E) ratio of 15.42, while the rest of the steel industry averages 23.43 times earnings. With its price to cash flow sitting under 10, this is an attractive stock with a 2.69% dividend. By comparison, the industry average sits at just 2.31%.
But the number that matters most is Nucor's VQScore of 4.75. That figure puts the stock square in our "Strong Buy Zone."
We believe it has upside to $85 per share once this infrastructure bill passes. So, you could make 50% if you buy now.
Infrastructure Stocks to Buy, No. 1
The top infrastructure stock to own is Caterpillar Inc. (NYSE: CAT).
This company has risen and fallen on the whims of U.S.-China trade relations. President Trump's recent threat of additional tariffs on Chinese imports has put pressure on industrial stocks like Caterpillar.
But we like when Wall Street is uncertain because that's when real opportunities to make some serious money exist...
A manufacturer of heavy industrial equipment, Caterpillar is usually the first company that people think of when they imagine large infrastructure projects. A $2 trillion program would require large orders of new equipment from contractors around the nation.
And there's more to like than just Caterpillar's upside from the possible infrastructure bill...
Despite fluctuations of investor sentiment since the onset of the first stimulus package under the Obama administration, Caterpillar's cash flow has remained robust. Cash flow has been so healthy that it's been able to return more profits to investors by doubling its dividend since 2010.
CAT is trading at a P/E ratio of just 12.28 compared to the S&P 500 average of 22.
Caterpillar's stock is trading at just 8.7 times cash flow. Anything under 10 is a bargain.
And we anticipate that this company could see its free cash flow jump to more than $25 billion in the next few years. That would leave plenty of capital after dividends and likely fuel either another dividend hike or a robust share buyback program.
The company's recent Q1 earnings report signaled big things ahead for the company. CAT hiked its full-year guidance profit outlook, reporting record profits with earnings per share of $3.25.
With CAT's 4.75 "Strong Buy" VQScore and a $2 trillion infrastructure bill potentially on its way before the end of the year, it's primed for huge gains...
Caterpillar has a potential upside of $225 per share. That figure represents an upside of nearly 72% from Wednesday's closing price.
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