Infrastructure shares, ETFs to look at when the invoice goes by way of Congress
Infrastructure stocks rose later this week after President Joe Biden-backed bill cleared another major hurdle.
Late Wednesday, the Senate voted to move forward with the Infrastructure Bill, which includes $ 550 billion in new spending on projects like moving the country to clean energy, building roads and rails, and expanding Internet access.
The PAVE ETF, whose stocks include Deere and Union Pacific, rose more than 1% on Thursday following that advance.
While the bill comes with the as-yet-unknown details, any influx of spending could have an oversized impact on industrial, commodity and utility stocks. CNBC’s “Trading Nation” asked its traders on Thursday which companies they see as the main beneficiaries.
“There are many ways to play this,” said Gina Sanchez, CEO of Chantico Global and chief market strategist at Lido Advisors. She pointed to the PAVE or IFRA infrastructure ETFs as two broad ways to build exposure.
But their preferred way of playing the space is in the materials sector.
“You’ve put one foot in front of the other this year by over 30%, so you could play the broad material ETF, or you could play certain names like BHP Billiton or Cleveland-Cliffs … That are steel names, and you need steel, you need aggregates, Vulcan Materials, and those are the types of names we’re looking at right now to really get ahead of this trade, “she said.
JC O’Hara, senior market technician at MKM Partners, said “follow the money” by investing in the areas where most of the funds are earmarked under the bill.
“We have found two key segments that we want to explore further – first, the power infrastructure. A lot of the money goes into it, so you have to look at the utilities, and the second part is water. We have $ 50 billion for water infrastructure. “At this point, we proposed another $ 55 billion to replace all of the lead pipes in the country, so that’s a big part of that bill,” O’Hara said.
There’s one name that makes O’Hara stand out – American Water Works, a $ 31 billion utility company that grew 11% in July.
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“If you look at the chart, there has been a lot of accumulation over the past 12 months. This week the utilities are breaking out to new highs, so technically very solid. Finally, this utility has a decent dividend yield that it has been doing in the US for 10 years, but what we like about it is the dividend growth of 10% a year, “O’Hara said.
American Water is slightly better than the S&P 500 at 1.4%. The stock has underperformed the S&P 500 this year, but has gained momentum over the past month.
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