These stocks and ETFs could be the biggest beneficiaries of the infrastructure bill

Infrastructure stocks took off late this week as a bill backed by President Joe Biden cleared another key hurdle.

Late Wednesday, the Senate voted to advance the infrastructure bill, which includes $550 billion in new spending for such projects as moving the country to clean energy reliance, building roads and rails and expanding internet access.

The PAVE ETF, whose stocks include Deere and Union Pacific, rose more than 1% on Thursday on the heels of that progress.

While the bill has a way to go with the details still unknown, any influx of spending could have an outsized impact on industrials, materials and utilities stocks. CNBC’s “Trading Nation” asked its traders on Thursday about what companies they see as key beneficiaries.

“There’s a lot of ways to play this,” said Gina Sanchez, CEO of Chantico Global and chief market strategist at Lido Advisors. She pointed to the PAVE or IFRA infrastructure ETFs as two broad ways to gain exposure.

But her favorite way to play the space is through the materials sector.

“They have been putting one foot in front of the other to the tune of over 30% this year, and so you could play the broad materials ETF or you could play specific names like BHP Billiton or Cleveland-Cliffs. …These are steel names, and you need steel, you need aggregates, Vulcan Materials, and so those are the kinds of names that we’re looking at right now to sort of really get ahead of this trade,” 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 within the bill.

“We found two key segments that we want to explore further — first, power infrastructure. A big portion of money is allocated to this, so you have to look at utilities, and the second portion is water. We have $50 billion for water infrastructure proposed at this time, another $55 billion for replacing all the country’s lead pipes, so that’s a big chunk of this bill,” O’Hara said.

There’s one name in particular that stands out to O’Hara — American Water Works, a $31 billion utilities company that has gained 11% in July.

“If you look at the chart, there has been strong accumulation over the last 12 months. This week, the utilities are breaking out to new highs, so technically very sound. And finally, this utility sports a decent dividend yield in line with the U.S. 10-year, but what we like about this is the dividend growth growing at 10% a year,” said O’Hara.

American Water yields 1.4%, slightly better than the S&P 500. The stock has underperformed the S&P 500 this year, but has picked up steam in the past month.


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