U.S. Bipartisan Infrastructure Investment Act: One-off Opportunity for Infrastructure Companies Stocks. Let’s See Main Beneficiaries.

A roughly $1 trillion compromise plan called the Bipartisan Infrastructure Investment and Jobs Act has recently passed in the U.S. Senate. The new infrastructure bill, which likely won't be considered by the House until fall due to the upcoming recess, remarkably includes $550 billion in new spending on physical infrastructure such as roads, bridges, rail, broadband internet and electric vehicles, among other similar large scale projects. That should be a rare impetus for traditional infrastructure stocks. Remarkably, the proposal contains provisions that will allow cannabis scientists and researchers to use marijuana that is available to them in local dispensaries.

The bill reauthorizes spending on existing federal public-works programs and pours a fresh $550 billion into water projects, the electrical grid and safety efforts. It includes $110 billion for roads, bridges and other projects, as well as $66 billion for rail, $65 billion for broadband internet and $55 billion for water systems. Citigroup research expects the infrastructure plan will lift steel demand by 3M-4M metric tons annually, with two-thirds for long steel products used in construction, Bloomberg reports.

Vulcan Materials (VMC, $190) is U.S.'s largest producer of construction aggregates, which includes modern products like crushed stone, sand and gravel. It's also a major producer of asphalt and cement. It operates through four segments: Aggregates, Asphalt, Concrete, and Calcium. Aggregates make up 76% of the company's revenues and 91% of its gross profit.

Based in Raleigh, NC, Martin Marietta Materials (MLM) could be among the best infrastructure stocks over the coming months or longer because the story here is very similar to Vulcan Materials. Martin Marietta is a building materials company that specializes in the inputs used in large construction and infrastructure projects. Among other things, it makes crushed sand and gravel products, ready-mixed concrete and asphalt, and paving products and services. The company also produces cement in Texas and uses its aggregates in its asphalt and ready-mixed concrete businesses. Additionally, Martin Marietta makes magnesia-based chemical products for industrial, agricultural and environmental applications, and produces dolomitic lime for the steel and mining industries.

Iron is primarily used in the creation of steel construction materials – an inseparable component of any and every major building erection or road pavement. So, as long as we are bullish on iron ore producers like Vale, we ought to consider other big names as well. This brings us to Nucor (NUE, $120.52), the largest national steelmaker in North America. Nucor yesterday, on Tuesday August 10, soared by over 8% and hit a record high and raced to the top of the S&P 500 leaderboard. It looks like the underlying rally isn’t over yet.

Caterpillar (CAT, $214.93), the most iconic maker of construction, pavement and mining equipment is easily one of the most apparent beneficiaries of the bill. Caterpillar's yellow trucks and machinery are ubiquitous in virtually every construction site across the globe. It makes asphalt pavers, compactors, excavators, pipelayers, backhoes and just about everything else you'd need for a major infrastructure project. In addition, Caterpillar stock has very appealing fundamentals. On July 30 it reported that its Q2 Non-GAAP EPS of $2.60 beat consensus by $0.19 while GAAP EPS of $2.56 also exceeded expectations by $0.27. Revenue of $12.9 billion (+29% YoY) was higher than anticipated by $370 million. Caterpillar's Q2 operating profit margin improved to 13.9% from 7.8% a year earlier.

Deere (DE, $378.60) is known best as a maker of tractors and other heavy-duty farm equipment. But the company does a lot more than that. It's also a major producer of construction and forestry equipment, and specifically the equipment used in earthmoving and roadbuilding. Agricultural machinery is still Deere's biggest segment, of course. In 2020, the company sold $22.8 billion in farming equipment. But its construction and forestry business also is a force to be reckoned with. This segment did a very healthy $9.2 billion in sales in 2020. And more than two-thirds of that was specifically sales of roadbuilding and construction equipment.

Finally, a few words about an infrastructure dedicated ETF which is now in everyone’s focus. PAVE, referring to the infrastructure ETFs ticker symbol, is up 28% so far in 2021, compared with year-to-date gains of around 15% for the S&P 500 and the Dow Jones. PAVE ETF accommodates 100 stocks, from small-cap to large-cap companies, that derive at least 50% of revenue from infrastructure construction, materials and equipment supply and related services in the U.S.