Editor's Note: Today we'd like to feature a guest column from Nathan Slaughter, Chief Stock Market Strategist for Scarcity & Real Wealth, StreetAuthority's premium newsletter that seeks to profit from the producers and processors of the rarest and most valuable assets on the planet -- precious metals, energy and other natural resources.
In this column, Nathan addresses what's become something of a buzzword again this year: Infrastructure. As Nathan points out in the article that follows, President Trump has pledged to rebuild outdated infrastructure on a scale not seen since Dwight Eisenhower proposed the national interstate highway system in the 1950s. If Trump and his allies have their way, it could lead to as much as $1 trillion in infrastructure-related spending over the next 10 years. That's a lot of cement (and other resources and services), but it's just icing on the cake when it comes to the appeal these companies hold for investors.
So... Which companies are likely to profit the most?
Here's Nathan's take on some of the opportunities for investors -- and it's actually a prelude to his next issue, which is due out in a couple weeks. If you're interested in learning more about Scarcity & Real Wealth, we've prepared a short report with more information. For more, click here.
The Incredible Opportunity In U.S. Infrastructure
Whenever we flip on a switch, we expect to see light. And when we turn on a shower faucet, we expect a stream of hot water. These basic utilities are 99.9% reliable, so it's easy to take them for granted. We don't give much thought to the pipes and lines that distribute electricity and water -- at least until there's a problem.
Then we panic until service is restored. If you've ever had to run a generator or boil your drinking water, then you know what I'm talking about.
Sadly, these outages have become all too frequent in many places. That's because much of the nation's basic infrastructure is dilapidated and in desperate need of repair or replacement. In some cases, the consequences can be severe -- just ask the folks in Flint, Michigan, who've been drinking lead-tainted water.
Bringing our infrastructure into the 21st century will require huge expenditures. And for investors, that spells opportunity.
I first wrote about this topic in September 2008. At the time, U.S. water utilities were losing six billion gallons of water per day to corroded distribution pipes, some of which were over a century old. And bridges were literally crumbling. A six-foot fissure had recently been found in a support pillar beneath I-95 in Philadelphia, forcing the detour of 185,000 vehicles a day.
I also called attention to other deficiencies, such as power transmission lines and wastewater treatment facilities. Perhaps the most neglected area was locks used by cargo barges to navigate through inland waterways, 50% of which were deemed "functionally obsolete."
The American Society of Civil Engineers (ASCE) assessed the damage in these and a dozen other areas and estimated it would take $1.6 trillion to repair and replace America's crumbling infrastructure. At least, that's where things stood back in 2008.
A lot has certainly changed in the intervening years: self-driving cars, a Cubs World Series win, and about six generations of iPhones. But not much has been done to modernize our infrastructure. It looks pretty much the same -- only 10 years older.
Sure, there have been some potholes filled. But large-scale public works projects have been few and far between. And I don't just mean roads and bridges, but airports, hospitals, hydroelectric dams, public parks, landfills, tunnels, water towers, mass transit systems, and other facilities.
The recently damaged Oroville dam and emergency spillway in California is just one example of stressed infrastructure that must be addressed quickly. The estimated cost to upgrade has skyrocketed from $1.6 trillion to $4.6 trillion over the next decade. That's the latest summary from the ASCE, which was released earlier this month.
None of this is lost on our new President. The revitalization of outdated infrastructure has been a central theme ever since the campaign. And in his first State of the Union address last month, Trump pledged to rebuild on a scale unseen since Dwight Eisenhower proposed a national interstate highway system in the 1950s.
Specifically, he has lobbied Congress for "legislation that produces a $1 trillion investment in the infrastructure of the United States." Now, his predecessor wasn't blind to the needs of infrastructure upgrades either. In fact, this is one of the few areas of bipartisan support. Four out of every five taxpayers are in favor of increased infrastructure spending. But politicians have had trouble agreeing how to fund it.
This is where Trump may succeed where others have failed. Instead of raising taxes or adding to the deficit, his policy calls for public-private partnerships to spur needed infrastructure investment. This plan will rely on tax breaks to encourage private funding for big projects. The credits would be offset by construction-related income taxes, making the plan revenue neutral to the government.
One trillion dollars will unleash a tidal wave of money that will wash over dozens of companies. Just a few of the likely homegrown beneficiaries include U.S. Concrete (Nasdaq: USCR) and U.S. Steel (NYSE: X) -- not to mention heavy equipment makers like Caterpillar (NYSE: CAT).
Even before Trump took office, I recommended my Scarcity & Real Wealth readers pick up stocks like Trinity (NYSE: TRN), which supplies construction aggregates such as gravel and asphalt. The stock has already bounced more than 20% since November.
At the moment, I've also got my eyes on Fluor (NYSE: FLR), a major engineering and construction outfit. Fluor is a trusted, go-to partner for multi-billion dollar construction projects, both public and private. The company has been awarded $21 billion in contracts over the past 12 months and should be a major recipient of government largesse over the next couple years. In the meantime, it already has a head start -- in the form of a $45 billion work backlog.
My next issue of Scarcity & Real Wealth will be devoted to U.S. infrastructure needs and some of the companies in the best position to benefit. It'll be published at the end of the month. If you want in on the action, I encourage you to check out this report, which will tell you a little more about my newsletter and the benefits it offers for readers.