Infrastructure Stocks Get a Boost After Bill Passage – Are They Worth the Investment?
Investors are on the hunt for stocks that could benefit from infrastructure spending as a $1 trillion bipartisan bill made its way through the Senate and goes to Congress later this year. The S&P 500’s materials and industrial sectors have already gained around 18% year-to-date, according to Reuters.
Meanwhile, other investors are jumping into companies that may benefit if the bill passes, such as real estate investment trusts and utilities.
After months of negotiations, the massive infrastructure package passed through the Senate on Tuesday, aiming to rebuild the country’s worsening roads and bridges and fund climate change mitigation and broadband initiatives. Analysts have been expecting that the bipartisan infrastructure bill would pass the Senate; however, they’ve cautioned that the economic impact won’t be collectively felt once it becomes law, MarketWatch noted.
Investors are preparing by diversifying their portfolios as stocks continue to rise amidst inflation concerns, the surging Delta variant and the Federal Reserve’s talks of tapering bond purchases, added Reuters. According to Refinitiv Datastream, per Reuters, the S&P has nearly doubled from its March 2020 low and is trading at 21.3 times forward 12-month earnings estimates, compared with its average of 15.4 times.
Scott Helfstein, head of Thematic Investing at ProShares, told Reuters that his firm has been optimistic about real estate investment trusts that own ports and cell phone towers, which he believes will benefit from the infrastructure bill. He also owns shares of natural gas companies, which he expects to benefit from the package as well.
While many investors are jumping in, some remain skeptical over adding to new infrastructure positions across the board, noted Reuters, due to stretched valuations and an earlier-than-expected pull of the Fed’s policies. This could create an upheaval in asset prices.
“We’re kind of in a holding period right now,” fund manager Barry James of James Advantage Funds told Reuters. “We think we have passed peak earnings for the market but this bill could give some companies another catalyst,” he said.
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