Presidential candidates Donald Trump and Hillary Clinton don’t agree on many talking points, and for obvious reasons. Trump is more in the conservative arena while Clinton the liberal one. But there is one thing that both candidates have said they will take action on if elected, and many of the top companies that stand to benefit from this may be outstanding buys now.
A new Jefferies research piece points out that both of the candidates have said that the infrastructure issues in the United States will be one of their biggest priorities, and with good reason. After years of neglect the nation has many roads, bridges, airports, electrical grids and a host of other important needs that need immediate attention. According to the report:
Public spending on infrastructure as a percentage of GDP is approaching all-time low levels, and the need for spending is further evidenced by increasing commuter delays, delayed flight departures and a high percentage of deficient bridges and roads. Should infrastructure spending rise towards the higher end of the historical range, it would be worth ~50 basis points of GDP (plus multipliers and external effects) and while there are many arguments against an increase in spending, the data in the report strongly suggests there is vast scope for improvement, especially with the backdrop of low rates, ample financing and an abundance of labor with limited skills.
The analysts feel steel companies, miners, autos, specialty finance and other sectors could benefit. Here are some stocks they specifically mentioned, and others in the categories.
This is a more off-the-radar pick that the Jefferies team thinks has big upside potential. AO Smith Corp. (NYSE: AOS) is a global leader applying innovative technology and energy-efficient solutions to products manufactured and marketed worldwide. The company is one of the world’s leading manufacturers of residential and commercial water heating equipment, as well as a manufacturer of water treatment products.
The company’s primary business is manufacturing water heaters and boilers for the residential and commercial markets. It is the market share leader in the United States for both residential and commercial water heaters. The innovative Wisconsin-based company also has a small — but growing — consumer water-treatment business that it started in China but has expanded into the United States.
An increased spend on infrastructure, including health, education, office buildings and commercial, should bode well for the company. The sales in infrastructure and commercial implies better margins and bodes well for the sustainability of improved margin.
Investors receive a 1.0% dividend. The Jefferies price target for the stock, which will soon split two for one, is $111. And the Wall Street consensus target is $100.09 The shares closed Friday at $98.79.
Jefferies has remained very positive on this company for years. Commercial Metals Co. (NYSE: CMC) manufactures, recycles and markets steel and metal products, and related materials and services in the United States and internationally.
As one of the leading suppliers to the nonresidential construction industry, Commercial Metals has revived as that area of the market has picked up. The U.S. Architecture Billings Index, an economic indicator that provides nine-month to 12-month growth forecasts of nonresidential construction spending activity, has shown growth in 21 of the past 24 months.
Shareholders receive a 2.96% dividend. Jefferies has a $16.50 price target for the Hold-rated stock, while the consensus target is $16.19. Shares closed Friday at $16.19.
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