Fresh off the passage of the latest coronavirus relief bill, President Joe Biden is focusing his attention on a multi trillion-dollar plan that could do more to bolster a U.S. economy hammered by the pandemic.
Biden’s advisors could present him with a detailed multipart plan in the coming days that could cost upwards of $3 trillion and would focus on infrastructure and then some.
The first potential bill would focus on boosting manufacturing, improving transportation systems, expanding broadband access, and reducing carbon emissions, while the second would focus more on people and education including extending the expanded child tax credit, tuition-free community college, universal pre-k, and a national paid leave program.
And the massive amount of infrastructure spending expected in the first bill could be very good news for some stocks – though maybe not the ones you’d guess first.
“We’d benefit from new bridges, roads, modernizing airports, things like that,” said Mark Tepper, CEO and President of Strategic Wealth Partners, “but if you’re looking at the industrials, a lot of that good news is already priced in.”
Looking specifically at Caterpillar (NYSE: CAT), Tepper says that while the industrial equipment giant will undoubtedly see a benefit from infrastructure spending, it has already risen more than 150% since its March 2020 bottom and could struggle to rise much higher.
Instead, Tepper is looking at another corner of the market.
“I would rather play this through a materials name,” Tepper continued. “I like Vulcan Materials (NYSE: VMC).”
Tepper argues that Vulcan is “versatile way to play this entire theme” given that it is the largest maker of construction aggregates in the nation.
“The stock’s only about 5% above its pre-COVID high,” Tepper added. “They benefit whether there’s this big ‘Rebuild America’ package, but they also benefit if we’re just in maintenance mode. …Personally, I think there’s a good amount of upside here.”
TradingAnalysis.com founder Todd Gordon says with wireless connectivity also playing a key roll in Biden’s infrastructure play, one other stock could be a big beneficiary.
“Biden’s infrastructure [plan] promised to modernize technology,” Gordon said. “That includes 5G, and if you have one of these new 5G phones,… it’s pretty fun to watch how often you come in and out of 5G. These towers have a very short span, a very short reach. You need a lot of towers, so there’s going to be a lot of future demand.”
And that’s good news for Crown Castle International (NYSE: CCI), an REIT and the nation’s largest provider of shared communications infrastructure including more than 40,000 cell towers and nearly 80,000 route miles of fiber supporting small cells and fiber solutions.
While Gordon notes that Crown Castle looks expensive at a multiple of more than 70 times next year’s earnings estimates, he says the stock is still “pretty competitively priced” relative to its peers. It also helps that the stock pays a 3.17% dividend yield.
The stock has just started to break out of a multi-month downward trending consolidation, and Gordon notes that CCI shares “have held above the 200 [week] moving average.”
Gordon added that it would be “very typical” to see such a technical pattern play out with a move higher, breaking above the resistance at the top of the consolidation range.
“If we can push though $170, that would be the go-ahead,” Gordon said. “I might actually look to increase my exposure there.”
Crown Castle shares closed just 1.4% below the $170 level on Wednesday.