Biden builds bridges and lifts infrastructure-linked companies

4 May

Biden builds bridges and lifts infrastructure-linked companies

After 100 days in office (and 41 executive orders, many of them addressing the previous tenant’s days in that same office), President Biden and his administration have now turned their attention to America’s future. And by attention, we mean money.

Among the President’s other big spending plans, the US could be in line for a US$2.3 trillion federal infrastructure stimulus—and you don't have to be a pure-play infrastructure company to benefit from the new administration's ambitious plans. What’s the best way to grab some of this momentum?

1/ Involved in infrastructure in any way, shape or form? Shout it out loud

Senior management in companies from construction to steel production, engineering software and renewables, have been clear—their companies are likely to benefit from President Biden’s investment intentions.

The markets are listening. Analysis by Debtwire shows a surge in stock prices among firms whose management have stated they could benefit from this monumental investment spree.

The six highlighted firms (see below) have seen their median year-to-date total return hit 26.6%. This is more than double the 11.5% return achieved by the S&P 500 and higher than the 19.8% seen on iShares US Infrastructure Exchange Traded Fund.

"Built to thrive": Firms linked to infrastructure are outperforming as management commentary remains upbeat

2/ Secure those contracts

Of course, making bold claims is one thing, delivering on those claims is quite another. Senior management should make every effort to secure contracts that go to tender. First things first, however—the bill still needs to pass through Congress. There is some resistance from Republican lawmakers, who have put forward their own proposal: a scaled back US$568 billion plan with a narrower focus on bridges and roads.

Either way, however, massive infrastructure investment is coming. The greater the scope, the more sectors and companies that stand to benefit from federal spending. But that all means nothing if you don’t have the contracts on your books.

3/ This investment goes big on green—promote sustainability

A core tenet of President Biden’s program is funding power grid modernization, energy efficiency and renewable energy development. Companies involved in these sectors are in a strong position. However, even traditional construction companies can improve their procurement potential by clearly demonstrating their sustainability credentials, without resorting to greenwashing.

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