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Booming industrial sector to get a jolt from Biden’s infrastructure bill. How to play it

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An employee assembles an excavator at the Caterpillar Inc. manufacturing facility in Victoria, Texas.
Callaghan O'Hare | Bloomberg | Getty Images

President Joe Biden's proposed $2 trillion infrastructure plan will result in another shot in the arm for companies across the industrials sector if Democrats are able to garner enough support for once-in-a-generation spending on roads, bridges and broadband access.

Industrials stocks, which have handily outperformed the broader S&P 500 over the last three months, could be set for even more gains, according to top industry analyst Nick Heymann.

Aerospace and defense, capital goods, industrial technology and building products subsectors could all be due for another wave of buying if the American Jobs Plan is passed, Heymann told clients in a note earlier this week.

Heymann, the co-head of William Blair's Global Industrial Infrastructure research, narrowed down a list of equities the firm believes could see the most additional upside thanks to big infrastructure spending in the months ahead.

"Industrial companies are now at the forefront of investors' focus as the industrial sector of the economy, which was severely impacted in 2020, is now leading the U.S. economy's resurgence," he wrote.

The Industrial Select Sector SPDR Fund, which tracks the performance of stocks of some of the largest industrials companies in the U.S., is up 12.4% year to date. The S&P 500 is up 9% over the same period while the Nasdaq Composite is up 7.3% and the Dow Jones Industrial Average has gained 9.4%.

"We have attempted to highlight a few stocks from all the Global Industrial Infrastructure (GII) subsector universes that might prospectively have the greatest exposures to end-markets that are currently proposed to see the largest infrastructure spending under [the plan]," he wrote.

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