Infrastructure stocks have been all the rage this year, and they're only going to get hotter now that a new $2.3 trillion spending bill is being pushed in Washington.
President Biden is asking Congress to fund a massive upgrade to infrastructure. The proposed legislation includes $621 billion for roads, highways, and bridges. Twenty-eight percent of the cash earmarked for the bill's transportation part goes to electric cars, including plans to build 500,000 electric vehicle charging stations. There are also plans to use electric vehicles in municipal bus fleets and replace the federal government's diesel transit vehicles with electric vehicles.
The bill calls for the removal of lead pipes in water systems, as well as drastic repairs to our electrical grid. Rail stations and airports will also get upgrades and repairs.
All in all, it is a $2.3 trillion package intended to create jobs and make some badly needed updates to U.S. infrastructure.
It's also going to pour money into a select group of companies who make these upgrades possible.
Investors have been snapping up the shares of infrastructure stocks for some time now. More value-oriented folks were buying in back in 2019, when the stocks all traded at small multiples of cash flow and assets.
Investors who tilted toward growth and thematic buyers began jumping when it became apparent that an infrastructure bill was inevitable.
But it's not too late to buy if you know where to look.
Here are the best infrastructure stocks to buy ahead of this massive new spending...
What you have to understand before buying infrastructure stocks is that these are now momentum stocks. Pretty much all the expected earnings growth they will get from the infrastructure bill is already baked into the stock price.
When you look at the ETFs that specialize in infrastructure, they are up enormous amounts over the last six months.
The best way to invest in the space right now is as a momentum investor. You want to buy the highest quality stocks that are seeing steady price appreciation and hold on for what we hope is a rocket ride higher.
Set your pain point and place your stop-loss orders accordingly.
Fluor Corp.
Fluor Corp. (NYSE: FLR) is one of the largest engineering and construction companies in the world today. It is involved in energy construction as well as traditional civil and large-scale infrastructure projects. It is also heavily involved with the U.S. Intelligence community to build and maintain secure facilities worldwide.
The stock is up 151% over the past six months. As long as the news from the company stays good and the bill stays on track for passage, the stock should continue to work its way higher as enthusiasm for the sector continues to build.
Granite Construction Inc.
Granite Construction Inc. (NYSE: GVA) is a leader in heavy civil infrastructure projects, including roads, highways, transit facilities, airports, and bridges. It also does many water infrastructure projects, including dams and flood control structures to reservoirs, wastewater treatment plants, and lined canals for agricultural irrigation.
Granite also does a good bit of work for the federal government to construct locks, dams, levees, waterway protection, tactical and military facilities, and provide airfield runway paving services.
Reading the news feed for Granite Construction is a parade of stories about new contracts won and awards and honors heaped upon the company.
Granite shares are up 127% over the last six months. As long as the news remains positive, that momentum should continue.
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MasTec Inc.
MasTec Inc. (NYSE: MTZ) builds infrastructure for the energy and communications industries in North America. It makes things like wireless, wireline, satellite communications systems, oil and gas pipeline infrastructure, and conventional and renewable power facilities.
Renewable energy and high-speed Internet networks are specifically mentioned and given enormous funding in the current version of the infrastructure bill. That should drive revenue into MasTecs coffers once the bill is passed and funded by Congress.
Like the other two infrastructure momentum plays, MasTec has been leading the way higher with gains of over 135% in the last six months.
Good news, positive earnings surprises, and a favorable result in Congress should keep the shares moving higher.
Well executed momentum strategies can produce enormous stock market profits. The institutional buying pressure should continue to flow into infrastructure stocks and help push them a lot higher during 2021.
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