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Infrastructure stocks took off over the weekend as a bill backed by President Joe Biden cleared another key hurdle.
On Wednesday evening, the Senate voted to advance the infrastructure bill, which includes $ 550 billion in new spending for projects such as the country’s shift to clean energy dependency, road construction and of railways and the extension of Internet access.
The PAVE ETF, whose shares include Deere and Union Pacific, rose more than 1% on Thursday on the rise.
While the bill has a long way to go with details as yet unknown, any influx of spending could have a disproportionate impact on inventories of industrial goods, materials and utilities. CNBC’s “Trading Nation” asked its traders on Thursday which companies they saw as the biggest beneficiaries.
“There are a lot of ways to play,” said Gina Sanchez, CEO of Chantico Global and chief market strategist at Lido Advisors. She said PAVE or IFRA infrastructure ETFs were two great ways to gain exposure.
But her favorite way to play with space is through the materials sector.
“They’ve put one foot in front of the other at over 30% this year, so you can play broad materials ETF or you can play specific names like BHP Billiton or Cleveland-Cliffs.… These are steel names, and you need steel, you need aggregates, Vulcan Materials, so these are the kinds of names we’re looking at right now to really get ahead of this business ” , she said.
JC O’Hara, chief market technician at MKM Partners, said “follow the money” by investing in the areas where the most funds are earmarked in the bill.
“We found two key segments that we want to explore further – first, electrical infrastructure. A lot of the money is going into that, so you have to look at utilities, and the second part is water. We have $ 50 billion for water infrastructure. Currently proposed, an additional $ 55 billion to replace all lead pipes in the country, so that’s a big part of this bill, “he said. O’Hara said.
There’s one name in particular that stands out from O’Hara – American Water Works, a $ 31 billion utility company that gained 11% in July.
“If you look at the graph, there has been a strong build-up over the past 12 months. This week, utilities are hitting new highs, so technically very strong. And finally, this utility is showing a decent dividend yield in line with the US at 10 years, but what we love about it is the dividend growth of 10% per year, ”O’Hara said.
American Water returns 1.4%, slightly better than the S&P 500. The stock has underperformed the S&P 500 this year, but gained strength last month.
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