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When Joe Biden signed the infrastructure bill – officially known as the Infrastructure Investment and Jobs Act – in November 2021, most people noticed the price tag. And with good reason. At $1 trillion, it was one of the most expensive pieces of legislation in history.

Now, I’m not here to debate the merits of the bill or what this type of government spending will do to the long-term fiscal situation of the country. What I am interested in is identifying which companies could potentially benefit from this level of spending. And one section of the legislation caught my eye.

It’s called the Broadband Equity, Access, and Deployment (BEAD) program. BEAD was created to expand high-speed internet access. It has $42.5 billion in funds to hand out to companies willing to bring broadband connections to rural and underserved parts of the country.

Today, let’s discuss policy investing. Or, if you prefer, feel free to call it “gravy train investing.” And it can be very profitable.

When Government Spends

Whatever you think of government spending, reckless or otherwise, there’s no denying it can create distortions in the market, pushing up certain stocks.

For an example, look no further than the Affordable Care Act (Obamacare), passed in 2010 under the Obama Administration. This was advertised as a landmark legislation that provided health coverage to over 20 million Americans. But put another way, that legislation forced 20 million Americans to buy health insurance -- insurance that is very profitable for those companies providing it.

Three of the largest U.S. insurers are UnitedHealth Group (UNH), Cigna (CI), and Humana (HUM). UnitedHealth Group is up some 1,600% since that legislation was signed. Cigna gained 970% in the 14 years since. And Humana is up “only” up 650%.

The new law wasn’t the only reason for that rise, but there’s no denying that government policy was a tailwind, one that was very profitable for a few investors. And so, the question is, are there any government tailwinds inside the BEAD program?

Almost Out of Limbo

In typical government fashion, money for the BEAD program has been stuck in limbo for years as bureaucrats squabble over how to dole it out. But the wait is almost over.

Late last year, Louisiana was the first state to complete all the requirements for the program, unlocking its $1.3 billion share of the money. Since then, Kansas, Nevada, and Virginia have also unlocked their funds from the BEAD program. Most of the other states are missing just one final step. But Florida, Maryland, Minnesota, Mississippi, and Rhode Island still have two steps to complete.

That means money will finally start flowing. But it doesn’t mean we’re done with the red tape yet -- because this is just the “initial approval,” and it only releases 20% of the promised money. Next, the states have to go through a “challenge process” and submit a final proposal within one year.

Once that’s approved, the remaining 80% of the money will be available. That’s likely to happen in 2025 or 2026. Then, the states will have four years to spend it.

The gravy train’s just getting started. And it’s going to keep chugging along through the rest of this decade.

Even though programs like BEAD are open to all who apply, the reality is that a large chunk of the awards end up going to just a few companies. That’s because the large national telecommunications companies are the ones with money to invest and the experience to navigate all the rules and regulations that come with government programs. They also have lobbyists to influence where the government funds go.

One company we’re keeping an eye on is Comcast (CMCSA). Comcast is one of the country’s largest internet providers. It serves more than 32 million customers. The company has been preparing to participate in BEAD for more than a year.

The market has been worried about Comcast’s growth slowing down. That’s why it trades at just 9x earnings – 44% below its average of 16x earnings over the past decade.

But billions of dollars in money from BEAD could help the company gain more customers. Comcast’s chief financial officer expects that the BEAD program could open opportunities for the company to expand its network in 2025 and beyond.

For now, we’re keeping Comcast on our watchlist as a potential 'sleep well at night' investment.

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