Dan C. from Cincinnati, OH asks: Do you think that Trump’s infrastructure plans will go through? And if so, does that mean there could be some building or materials companies that could make for good stock investments? What are some of the good ones you’d recommend?
Mitch’s Response: Thanks for writing, Dan. Your city received a lot of attention last week when President Trump visited to kick off “infrastructure week,” with particular emphasis on locks, dams, and rivers. Hopefully, you are not personally affected on a daily basis by the traffic on the Brent Spence bridge!
Sorry to disappoint you early on in my response, but I cannot actually recommend specific stocks without knowing more about your financial situation, goals, and the current structure of your investment portfolio. Without knowing more about you, I have no way of being sure which stocks and strategies may or may not be suitable. If you want to reach out to me or a Zacks Investment Advisor, however, we can provide you more details – 1-888-600-2783.
In the meantime, I will talk about infrastructure on a high level, which will hopefully provide you with some valuable insights into the space. Most of our analysts here at Zacks Investment Management are a bit skeptical about just how much the government will approve of infrastructure spending. Both parties want it but differ widely on how to pay for it. President Trump’s budget blueprint that his team released in May proposed $200 billion in infrastructure spending over 10 years, which, frankly, is a drop in the bucket compared to the estimated $4.95 trillion needed to upgrade U.S. infrastructure from its current D+ rating to a B (according to the American Society of Civil Engineers). That’s like putting a down payment of $20,000 on a $500,000 home – you’ll still have a really long way to go before paying it off.
There is also the matter of how long it might be before the administration is able to finish infrastructure-related legislation, especially considering the fact that President Trump wants to create a new public-private approach to infrastructure and given that Republicans do not want to raise taxes. If you also consider the headache that healthcare has already been for this administration, and tax reform being set to decrease government revenues, it could be difficult to envision a big infrastructure bump in the next year or two. As a result, U.S. infrastructure stocks have cooled off following the initial bounce we saw after the November election.
What’s more, if a big part of the Trump’s vision for infrastructure involves privatization of municipal entities, then we are not even sure yet which companies may come into existence and benefit the most from government spending. That’s an investment play that is far down the road, in my view.
In my opinion, the infrastructure (Industrials/Materials sector) stocks we want to own are those with stable revenues and a solid contract pipeline, not those who may be poised to see quick growth from new construction. There are several companies in that realm that we like a lot, that we’d be happy to discuss with you on a phone call – 1-888-600-2783.
But, it is important to keep in mind that you shouldn’t put too much of your focus on ONE company or ONE sector for that matter. One of the most optimal ways to reduce risk and boost returns is instead to focus on diversification and asset allocation. This is what we do at Zacks Investment Management, and we are proud to have a proven track record for success as our disciplined philosophy has placed us in the top rankings of thousands of equity managers in the Morningstar Equity Universe. If you would like to speak to one of our advisors do not hesitate to reach out to us. In fact, we would be happy to schedule you a free Asset Allocation – simply reach out to us at 1-888-600-2783.
Disclosure