The infrastructure sector rallied last week after President-Elect Barack Obama announced a potential $500 billion to $700 billion stimulus plan centered on building highways, roads and bridges. But as Cramer pointed out Monday night, not all infrastructure companies are created equal, so only a few should have jumped off the news.
Some infra firms get the bulk of their revenues from the energy sector. But Obama’s plan won’t help those that drill for oil and gas. For these names to work, we need to see a rise in energy prices. So forget about owning Shaw Group , Foster Wheeler and even Chicago Bridge & Iron as a play here (yes, CBI; the compay gets more than half its revenues from liquefied natural gas projects).
What should you own then? Cramer likes Martin Marietta and Vulcan Materials because they make asphalt, concrete and cement. Both companies get half their sales from U.S. roads and bridges construction. Look to pick up MLM in the mid $60s and VMC at $49 and below.
Caterpillar and AECOM got the nod as well. CAT’s got a great yield these days after taking such a beating, and 70% of ACM’s backlog comes from government-funded projects. Try to pick up some ACM below $20 a share.
One stock heavy in the road and bridges business that doesn’t work right now, though, is Granite Construction. It will benefit from the Obama plan, but the share price has already moved too much, Cramer said. It’s just five points off its 52-week high, and the company’s performing poorly to boot.
Remember, though, that this stimulus plan won’t hit the bottom lines of these companies for at least three quarters, and hedge-fund selling isn’t done yet. So be patient and build your positions over time.
Jim's charitable trust owns Foster Wheeler.
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