In this article we will take a look at the 10 best stocks that will gain from Biden’s job and infrastructure plan.
US President Joe Biden last week unveiled an ambitious $2 trillion plan to overhaul American infrastructure. The plan envisions increased government spending on rebuilding roads, bridges, water supply mechanisms, transportation networks, and advanced manufacturing within the country. It also includes proposals to invest money into improving access to high speed broadband, clean energy projects, and research and development across the nation to compete with China while improving the living standard of average Americans.
Stocks of the companies that stand to benefit from this government spending have been surging since the plan was announced. President Biden aims to create millions of new jobs in the country through the proposal and has dubbed it the American Jobs Plan. However, it will have to be approved by Congress to be implemented and would require the White House to reach out to Republican lawmakers for support. As lawmakers tussle over the technical details, it makes sense for investors to understand the plan in detail to strategize for future financing.
Which Sectors Will Benefit From Biden’s Plan?
The $2 trillion plan is divided into four sectors that include $650 billion for infrastructure, $620 billion for transportation, $580 billion for research and development, and $400 billion for a caretaking economy. In the infrastructure category, $100 billion have been proposed for improving high speed broadband networks in the country. In the transportation sector, $174 billion have been set aside for the electric vehicle industry. In the research sector, $300 billion are earmarked to improve local manufacturing.
The breakdown of the spending has key insights for investors. One key takeaway is that since the plan will be funded in part through corporate taxes on multinationals that make profits overseas, it is more prudent to invest in American manufacturing. Another strategic bet would be investing in companies that are most likely to survive Congress politics as the proposal becomes law. For example, some Republican lawmakers seem keen on backing infrastructure projects, but only to the extent of rebuilding of roads, bridges and airports.
Internet Stocks After Biden’s Ambitious Connectivity Plan
However, for many across America, the definition of infrastructure has changed over the years and the Congress vote on the law is likely to reflect the change. In developed economies like the US, where more than 90% of the population has access to the internet and where the high-tech services industry provides a huge boost to the overall GDP, the importance of high speed broadband has taken on a new meaning. Indeed, as countries like China move forwards with plans to adopt 5G technology on a wider scale, the US is still lagging behind because of regulatory and trade issues that are compounded by misinformation on the subject.
Photo by Scott Blake on Unsplash
President Biden has called broadband the new electricity since it has become important for Americans to do their jobs, to participate equally in school learning, health care, and to stay connected. Even so, there is some reason to be cautious when backing technology-related stocks as the market is still volatile on them. The instability of these options has affected not only individual investors but entire investment portfolios over the past few months, due in part to the uncertainty surrounding the reopening of the economy.
The entire hedge fund industry is also feeling the reverberations of the changing financial landscape. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and February 26th 2021 our monthly newsletter’s stock picks returned 197.2%, vs. 72.4% for the SPY. Our stock picks outperformed the market by more than 124 percentage points (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 16th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
With this context in mind, here are our picks for the top 10 best stocks that will gain from Biden’s jobs and infrastructure plan.
10. Cleveland-Cliffs Inc. (NYSE: CLF)
Cleveland-Cliffs Inc. (NYSE: CLF) is an Ohio-based company in the mining and steelmaking business. As the Biden plan for jobs and infrastructure has placed an emphasis on rebuilding roads and bridges, as well as backing American manufacturing, the company is uniquely placed to benefit from the proposal as the largest steelmaker in the country. Cleveland-Cliffs has signaled it is prepared to invest aggressively to gain a foothold in the market, as acquisitions of AK Steel and ArcelorMittal over the past year have demonstrated.
The company has a market cap of over $9.2 billion and posted more than $5 billion in revenue the past year. Data released by S&P Global Market Intelligence shows that stocks for Cleveland-Cliffs have soared more than 50% over the past month. In an earnings report issued on March 30, the company projected first quarter earnings of $500 million, second quarter earnings of $1.2 billion and full year earnings of $3.5 billion. Cleveland-Cliffs is 10th on our list of top 10 best stocks that will gain from Biden’s jobs and infrastructure plan.
As of the end of the fourth quarter, 27 hedge funds in Insider Monkey’s database of 887 funds held stakes in CLF, compared to 22 funds in the third quarter. Ken Fisher’s Fisher Asset Management is the biggest stakeholder in the company, with 17.2 million shares, worth $249.97 million.
9. Quanta Services, Inc. (NYSE: PWR)
Quanta Services, Inc. (NYSE: PWR) is a Houston-based company that provides infrastructure services for communications, industries, electric power companies and pipeline projects. The American Jobs Plan has outlined hundreds of billions of dollars in funding for all these sectors. The importance of Quanta Services is made more relevant as it is one of the key players in the American market that focuses on modernization of the electrical grid using renewable energy, something that Biden has stressed is one of his top priorities as US president.
The market cap of the firm is close to $13 billion and it posted more than $11 billion in revenue in December 2020. Keybanc Capital Markets, an investment advisory, has singled out Quanta Services as one of the firms that stands most to gain from the jobs plan. Over three years, the company has managed to grow 16% per year on an earnings-per-share (EPS) basis. The firm is also a profitable one, with modest growth targets that it is likely to meet. It is 9th on our list of top 10 best stocks that will gain from Biden’s jobs and infrastructure plan.
Peconic Partners LLC currently owns 5.4 million shares of PWR, worth $388.3 million. Quanta Services occupies 46.54% of Peconic Partners’ overall equity.
8. Vulcan Materials Company (NYSE: VMC)
Vulcan Materials Company (NYSE: VMC) is an Alabama-based company in the business of producing, selling, and distributing construction materials. In the US, the firm is the largest producer of construction aggregates, namely gravel, crushed stone, sand, and concrete. The Biden jobs plan has set aside more than $100 billion to rebuild roads, bridges and airports across the US. Vulcan Materials is in a good position to earn from these projects. In investor presentations, the company markets itself as a server of a growing US southern populace..
The market cap of the firm is more than $22.5 billion and it posted more than $4.8 billion in revenue in December 2020. Vulcan Materials has a strong presence in the US south, a segment of the country that is projected to witness a growth in employment and housing needs as the population of the area grows faster than other regions in the country. The company could benefit enormously from this boom. VMC stock is 8th on our list of top 10 best stocks that will gain from Biden’s jobs and infrastructure plan.
A total of 44 hedge funds tracked by Insider Monkey were bullish VMC at the end of the fourth quarter, up from 42 funds a quarter earlier.
7. American Tower Corporation (REIT) (NYSE: AMT)
American Tower Corporation (REIT) (NYSE: AMT) is a Boston-based real-estate investment trust that owns and operates mobile phone towers across the world. American Jobs Plan envisions spending more than $100 billion to widen the high speed broadband nest in the country; ranking as one of the top communications infrastructure firms in the US with close to 50,000 sites, it is positioned to gain from the passing of the plan in Congress. In the last three months, the stock for the firm has gained more than 5%.
The company has a market cap of more than $108 billion and posted more than $8 billion in revenue in December 2020. The expected rollout of 5G communications networks across America is also another factor in the expected future growth of American Tower. RiverPark Advisors, an investment management firm, highlighted the stock of the firm as one to watch out for in 2021 as increased wireless data usage and 5G network deployment drives double digits capital spending growth. AMT is 7th on our list of top 10 best stocks that will gain from Biden’s jobs and infrastructure plan.
Charles Akre’s Akre Capital Management is one of the 61 hedge funds tracked by Insider Monkey having stakes in AMT at the end of the fourth quarter. The fund owns over 7.1 million shares of the company.
Richie Capital Group, in their Q4 2020 investor letter, mentioned American Tower Corporation (REIT) (NYSE: AMT). Here is what Richie Capital Group has to say about American Tower Corporation in their Q4 2020 investor letter:
“American Tower (AMT – Down 9.15%) – The largest operator of wireless towers has faced challenges in the form of customer churn at one of their largest customers: Sprint/T-Mobile. However, the company remains well positioned as carriers domestically and internationally transition to 5G which will require a densification of their networks.”
6. Applied Materials, Inc. (NASDAQ: AMAT)
Applied Materials, Inc. (NASDAQ: AMAT) is a California-based firm that supplies equipment, services and software for the manufacturing of semiconductor chips. These chips are then used in a wide range of products, including smartphones, laptops, televisions, and solar panels. As broadband occupies a top priority in the American Jobs Plan, the digital acceleration of the economy from high-speed internet is expected to drive the demand for these chips, leading to a gain in the stock value of Applied Materials that has a 20% market share in the chip business. The firm has a market cap of more than $128 billion and posted a revenue of more than $20 billion.
The company has also said that the demand for artificial-intelligence-based data by businesses is expected to lift the semiconductor market to $1 trillion/year by the end of the decade. Leading investment banks like RBC Capital Markets and JP Morgan have taken a bullish stance on Applied Materials stock, rating it as Outperform and Overweight, respectively. RBS has given the AMAT stock a $140 price target while JP Morgan has given it a $146 price target. The firm is 6th on our list of top 10 best stocks that will gain from Biden’s jobs and infrastructure plan.
As of the end of the fourth quarter, there were 61 hedge funds in Insider Monkey’s database that held stakes in Applied Materials Inc., compared to 59 funds in the third quarter. Generation Investment Management, with 5.2 million shares of AMAT, is the biggest stakeholder in the company.
5. American Electric Power Company, Inc. (NASDAQ: AEP)
American Electric Power Company, Inc. (NASDAQ: AEP) is an Ohio-based electric company meeting the electrical needs of millions of American citizens in more than ten states across the country. President Joe Biden has marked $100 billion to modernize the American electrical infrastructure, and AEP could gain from the plan as it owns the largest electricity transmission system in the country. The firm also has a stake in the electrical transmission system of Texas, a state that Biden has singled out as long overdue for an upgrade in electric transmission.
The market cap of the company is more than $43 billion and it posted a revenue of close to $15 billion in 2020. Morgan Stanley, a leading investment bank, earlier this year urged investors to pick AEP. Stephen Byrd, an analyst at the investment bank, said stocks of firms like American Electric were on the growth trajectory as they moved away from coal power and towards clean energy in line with government initiatives in this regard. American Electric is 5th on our list of top 10 best stocks that will gain from Biden’s jobs and infrastructure plan.
The company is also getting the attention of the smart money, as 32 hedge funds tracked by Insider Monkey reported owning stakes in the company at the end of the fourth quarter, up from 30 funds a quarter earlier.
4. Union Pacific Corporation (NYSE: UNP)
Union Pacific Corporation (NYSE: UNP) is a Nebraska-based railroad holding company. It is one of the largest rail providers in the Western US, posting strong profits that it expects to grow by 31% over the next two years. The stock of the firm saw a new high of $219 over the past few months and was in the portfolio of 68 hedge funds at the end of last year. The company has a market cap of more than $147 billion and posted more than $19.5 billion in revenue in December 2020. It is expected to benefit from the spending on American infrastructure in the next few years if the American Jobs Plan is passed.
Leading investment firm Morgan Stanley increased the price target of Union Pacific from $170 to $180 earlier this week. The investment firm had an Equal Weight rating on the stock of UNP. Another investment bank, Credit Suisse Group, had set the rating of Union Pacific stock to Outperform and revised their price target to $243 earlier this year. Stocks for the railroad company were up 0.11% in trading earlier today. The firm is 4th on our list of top 10 best stocks that will gain from Biden’s jobs and infrastructure plan.
Chris Hohn’s TCI Fund Management, with 6 million shares of UNP, is the biggest stakeholder in the company.
3. Evoqua Water Technologies Corp. (NYSE: AQUA)
Evoqua Water Technologies Corp. (NYSE: AQUA) is a Pennsylvania-based holding company that provides water treatment solutions. The firm offers capital systems and related recurring services for treating industrial process water, utility water, and wastewater. It has served the healthcare, pharmaceutical, food and beverage, and other industries. Evoqua also makes products that filter and separate clean and dirty water. Since the American Jobs Plan envisions the provision of clean water to every American household, the firm could benefit from it.
It has a market cap of more than $3 billion and posted more than $1.4 billion in revenue in September 2020. Over the past month, the share price of the company stock has increased by more than 7%. The price of shares is 30% higher than what it was three years ago. The earnings per share for the stock have increased by 8.8% in the past twelve months. The company is 3rd on our list of top 10 stocks that will gain from Biden’s job and infrastructure plan.
As of the end of the fourth quarter of 2020, Impax Asset Management owns 3.3 million shares of AQUA worth $99.5 million. AQUA accounts for 0.63% of Impax Asset’s total portfolio.
2. Activision Blizzard, Inc. (NASDAQ: ATVI)
Activision Blizzard, Inc. (NASDAQ: ATVI) is a California-based video game holding company. It is one of the largest game companies in North America and Europe in terms of market capitalization and revenue. US President has pushed for increased access to high-speed broadband across the country, and the firm stands to gain as more people will use the entertainment services it offers in a growing digital economy. The COVID-19 pandemic pushed the stock of the firm higher owing to increased video-game demand.
The company has a market cap of more than $75 billion and posted more than $8 billion in revenue in December 2020. Berenberg, a multinational investment bank, earlier this year reiterated a Buy rating on Activision stock despite the reopening of the economy because of the frequency of high quality new content the video game company was releasing. The price target was set at $105 in a 14% upside in outlook. The shares of the company feature 2nd on our list of top 10 best stocks that will gain from Biden’s job and infrastructure plan.
Ken Griffin’s Citadel Investment Group currently holds 4.97 million shares of Activision Blizzard that amounts $461 million. ATVI occupies 0.12% of Citadel’s total portfolio.
1. AECOM (NYSE: ACM)
AECOM (NYSE: ACM) is a California-based American engineering firm. Since infrastructure spending forms the biggest chunk of the American Jobs Plan, the firm will stand to gain a lot from the multitude of new projects that will be initiated by the US government if the plan is approved by Congress. The firm has over 80,000 employees and offers design, construction and engineering services across the country. It also operates an environmental and risk management department for big projects.
The company has a market cap of close to $10 billion and posted more than $13 billion in earnings in September 2020. Last month, the firm was awarded a $2 billion US Air Force contract for infrastructure and facilities. The long-term outlook for the company looks great and with big government projects on the horizon, the stock prices could rise and offer handsome returns to investors. The company ranks 1st on our list of top 10 best stocks that will gain from Biden’s job and infrastructure plan.
According to our database, the number of ACM’s long hedge funds positions decreased at the end of the fourth quarter of 2020. There were 37 hedge funds that hold a position in AECOM compared to 39 funds in the third quarter. The biggest stakeholder of the company is Jeffrey Smith’s Starboard Value LP, with 7.8 million shares, worth $386.9 million.
You can also take a peek at 10 Most Profitable Cash-Only Businesses To Avoid Taxes and Unknown Billionaire Phill Gross’ Top 10 Stock Picks.
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originally published on Insider Monkey.