By: Spencer Israel
The market’s assumption that a Biden Administration would benefit certain industries in one way or another moved one step closer to happening on Wednesday, with the unveiling of Biden’s $2 trillion infrastructure spending plan.
Assuming the plan gets through Congress—and ignoring the potential impacts of the corporate tax hike that he claims would pay for all this—the ramifications for investors are far and wide.
Here are some names to consider for potential plays on the plan.
General U.S. Infrastructure
Biden’s plan calls for about $620 billion to update roads, ports, and bridges—AKA what most people think when they hear “infrastructure.”
Two such ETFs that provide direct exposure here are the Global X US Infrastructure Development ETF (PAVE) and iShares U.S. Infrastructure ETF (IFRA). PAVE offers exposure to industrials like Deere & Company (DE), Parker-Hannifin (PH), and railroads, while roughly 42% of IFRA is in utility stocks. Caterpillar (CAT) is also frequently mentioned, though the stock has already run up 28% in 2020
Broad-Based Clean Energy
The plan also includes $300 billion earmarked for the manufacturing of clean energy and clean energy-related infrastructure in the U.S.
The largest clean energy ETF by assets is the iShares Global Clean Energy ETF (ICLN). Though it offers global exposure, about half of the fund is allocated to U.S. solar and wind stocks. Other common clean energy ETFs include the First Trust NASDAQ Clean Edge Green Energy Index Fund (QCLN), which has 100% U.S. exposure, the Invesco WilderHill Clean Energy ETF (PBW), and Invesco Solar ETF (TAN).
Biden also wants to allocate $174 billion to expand access to electric vehicles, including building out our EV infrastructure via charging stations and adding incentives for both EV producers and consumers.
There are about 3 gas stations for every EV charging station in the U.S. according to the Department of Energy. Biden’s plan would establish grant and incentive programs for states, municipalities, and the private sector to build 500,000 EV chargers by the end of the decade.
A couple of EV charging stocks charged ahead on Wednesday, as Chargepoint (CHPT) rose 18% and Blink Charging (BLNK) rose 11%. Both stocks have pulled back this year with the rest of growth after huge runups in 2020.
Of the manufacturers, only Tesla (TSLA) seemed to get a short-term boost on Wednesday.
The plan also would allocate $111 billion to update the country’s water infrastructure. Investors looking to get exposure to water utilities and water infrastructure may want to consider the
Invesco Water Resources ETF (PHO), First Trust ISE Water Index Fund (FIW), or Ecofin Global Water ESG Fund (EBLU).
Another obvious infrastructure play, the steel industry has rallied hard in recent weeks (though some of this has likely been due to the rotation into value stocks.
The VanEck Vectors Steel ETF (SLX) offers broad-based steel exposure to stocks like US Steel (X), Nucor (NUE), and Cleveland-Cliffs (CLF), and is the top-performing materials ETF year-to-date.
On the technology front, Biden’s plan calls for allocating $100 billion to expand high-speed internet access.
The logical play here is funds that give exposure to semiconductor and wireless network companies that enable the technology. The Defiance Next Gen Connectivity ETF (FIVG), Pacer Benchmark Data & Infrastructure Real Estate SCTR ETF (SRVR), First Trust Indxx NextG ETF (NXTG), and Global X Internet of Things Thematic ETF (SNSR) are the most popular such ETFs in terms of assets.
Semiconductor names may also be of particular interest, as Biden has asked Congress for $50 billion to invest in the domestic production of semiconductors in the midst of a global shortage. So companies like Marvell Technology (MRVL), Qualcomm (QCOM), Intel (INTC), Analog Devices (ADI), Qorvo (QRVO), Broadcom (AVGO), and Texas Instruments (TXN) could benefit.
Keep in mind, all of this is tentative. We still don’t know if (or how much of) this plan will come to pass. And beyond that, any specific company mentioned is merely an educated guess.
The author is long the S&P 500 in his retirement portfolio. He is also long FIVG and SRVR.
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