Trading the US Infrastructure Bill: the stocks to watch

Equities

After years of partisan negotiation, the US has finally passed a new $1 trillion Infrastructure Bill. Some stocks could be poised to make big gains now on this Bill’s approval. Here are some equities to watch.

The US Infrastructure Bill

What is the Infrastructure Bill?

America’s infrastructure is ageing. There hasn’t really been a concerted push to upgrade the country’s roads, bridges, water systems, or power grids for decades. The cost is a hefty one, but this $1 trillion investment is sorely needed.

President Biden’s Infrastructure Bill has laid out the plan for a country-wide overhaul of key infrastructure as part of an overall $3.5 trillion budget resolution that incorporates job creation, house building and more.

The Bill was passed by the Senate on Tuesday as both Republican and Democratic parties reached a compromise. Originally, planned spending was over double the final amount, estimated at $2.3 trillion. It now goes to the House of Representatives.

There are shades of FDR’s New Deal, in which massive construction and infrastructure projects were introduced as a way of combatting the US’ economic slump in the wake of the Wall Street Crash.

But with aging national power and water supply systems and transportation links, the US really could use an infrastructure overhaul. It’s finally getting one.

Of the total $1 trillion, over half ($550bn) has been apportioned for Federal roads, bridges, airports, waterways, broadband, water systems and the power grid. This will be split over a five-year period.

Infrastructure Bill stocks to watch

The Bank of America has laid out five stocks it believes can benefit greatly from upcoming US infrastructure spending.

As to be expected, they are mostly engineering and construction firms.

Jacobs and AECOM are two stocks BofA has in its sights. It believes both engineering companies could play a key role in numerous projects the Bill necessitates, including new road and bridge construction developments, as well as power supply upgrades, ports, and further transit projects.

In projects like this, it can also be beneficial to check out equipment and machinery manufacturers too. Bank of America has flagged Deere and Caterpillar as infrastructure stocks with high potentials.

Deere is perhaps the highest quality large cap Machinery name with both cyclical and structural tailwinds,” BofA analyst Ross Gilardi said.

Engine and generator maker Cummins has also been flagged as an infrastructure Bill winner by the Bank of America. The bank has a 12-month price target of $325 on the stock, about 39% higher than the stock’s Tuesday closing price of $233.77.