The presidential and congressional elections for 2016 have come and gone. Much of America may be divided on the results, but there are some serious business and economic policy changes coming down the pipe. The first order will be infrastructure. If you go back to Donald Trump’s speech after Hillary Clinton conceded, one of the top issues was rebuilding America’s aging infrastructure and the inner cities. This is going to represent a huge opportunity for the economy and for the investors who get the right calls on infrastructure.
24/7 Wall St. has tracked major infrastructure winners for years, with 11 would-be winners back in early 2013. Some of those companies have since merged. That was on the heels of the four-year report card from the American Society of Civil Engineers (ASCE). Another ASCE report card is due in late 2016 or in early 2017. The outcome is that the $2.75 billion needed to be spent on infrastructure to make America’s infrastructure great again will be well over $3 trillion now. A core problem of the past four years is that the massive spending boost for infrastructure just did not occur on any grand scale.
Here is a prediction for 2017 and beyond: Infrastructure spending is really going to happen this time around. A preview for the 2017 outlook from the ASCE already calls for higher spending in 10 infrastructure areas: aviation, bridges, drinking water, electricity, inland waterways, ports, commuter rail, roads, transit and wastewater.
Before investors just run out and invest blindly in infrastructure stocks, there are some serious realities that must be considered. Some of these stocks already have rallied handily higher since the November 8 closing bell before the election results were in. Some companies also have faced hard quarters with weak trends over the past few quarters.
It is very unlikely that this trend will be reversed with real spending dollars for several quarters ahead. It could even be years ahead in some cases before these companies realize the real benefits because large projects can take so long to come about. If you think getting an infrastructure contract from a federal, state or local government is easy or quick, guess again. Even in early August, well before the election and infrastructure paths were known, Barron’s published a report called ‘Infrastructure Stocks Look Overheated’ with a note that there had been a 17% jump in the iShares Global Infrastructure ETF.
It is important for investors to consider that when stocks run up on hopes of a quasi-secular or long-term thematic changes, sometimes the stock prices can run up too much. This means that nimble investors might want to consider these companies on pullbacks or only by averaging in slowly over time at lower or even higher prices. Piling into an “all-in” position at one time may work in theory, but it can also come with pain.
The Dow Jones Industrial Average was 18,332 on Tuesday’s pre-election final close, and Dow futures went down over 700 points before Trump’s speech in the wee hours of Wednesday morning. The Dow then rose for three straight days to close at 18,847 on Friday, after miraculously hitting all-time highs on Thursday.
Many other sectors other than infrastructure saw their shares witness major price changes this last week. There were nine major losers from Clinton not winning, and there were 11 immediate winners under a Trump victory. We also saw major rallies in the top banks and the hospital stocks get crushed.
24/7 Wall St. has included basic performance data on how well each of these key infrastructure stocks rose from Tuesday’s pre-election close by Friday’s close. We also included historical trading data, the consensus price target from Thomson Reuters and dividend information.
Offering architecture and engineering design services, AECOM (NYSE: ACM) operates through three segments: Design and Consulting Services, Construction Services, and Management Services. It services the transportation, environmental and energy sectors, and it also serves key infrastructure projects such as highways, airports, bridges, wastewater facilities and power transmission and distribution. This puts AECOM right in the major infrastructure investing crosshairs for what you can expect ahead.
AECOM has a market value of about $5 billion now, versus $2.7 billion in early 2013. After acquiring URS, AECOM now has close to 92,000 employees around the world.
AECOM shares closed up just one cent at $32.22 on Friday, but this is a gain of 15.6% since Tuesday’s close and a gain of 19.7% from Friday to Friday. AECOM has a 52-week trading range of $22.80 to $36.20, and it has a consensus analyst price target of $34.67.
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