A Small Cap Infrastructure Trio

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President Biden unveiled his “American Jobs Plan,” a proposal to spend $2.3 trillion to upgrade the country’s infrastructure over eight years. Biden proclaimed the plan a “once-in-a-generation investment in America."

Biden’s plan is as broad as it is bold. It calls for the U.S. to update roads and bridges, expand public transportation, roll out a network accommodating electric vehicles, reduce utilities’ carbon emissions, replace all lead pipes and service lines, update public schools, expand internet access for rural communities, and support semiconductor manufacturing and research.

It also proposes significant investment in caring for the country’s elderly and disabled. Biden aims to fund the plan over 15 years by raising both the U.S. corporate tax rate and the minimum tax on U.S. companies’ foreign profits.

Higher taxes would create a drag on corporate profits, especially for the companies that saw the largest tax rate declines from the 2017 tax cuts. Still, the higher taxes may be phased in gradually. And the higher tax burden would be at least partially offset in two ways.

First, some companies would benefit from the higher direct infrastructure spending, which could reach about 4.5% of U.S. gross domestic income, the highest level since the early 1970s, according to Goldman Sachs.

Second, a larger group of companies would enjoy productivity gains from the infrastructure improvements, such as lower transportation and energy costs, along with better access to larger markets.

Even if the bill’s total price tag is ultimately slashed, many of our stocks still stand to benefit because infrastructure spending in their sectors is overdue and necessary, such as revamping the country’s electrical power grid.

In the proposal’s current form, top winners include companies leveraged to clean energy, construction, communications-hardware, and semiconductor equipment.

Atkore (ATKR) makes electrical raceway products, metal framing, and construction services; demand for these products should get a boost from the wave of new construction promised by President Biden’s infrastructure bill. Key end markets for Atkore include new construction, alternative power generation, and the U.S. government.

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