The Truth About Trump’s Infrastructure Plan

David Fessler By David Fessler, Energy and Infrastructure Strategist, The Oxford Club

Market Trends

Donald Trump has always been a big thinker. Now that he’s our 45th president, he’s thinking even bigger.

That’s why infrastructure spending and Trump are so compatible. Trump likes to see what he’s spending his money on.

And he’s creating a big opportunity for investors.

I recently wrote about his America First Energy Plan that appeared on the White House website. If you missed it, you can read about it here.

Since then, his infrastructure gurus have added more meat to it.

Trump and his team have listed the top 50 infrastructure projects they want tackled. Here’s his “Priority List: Emergency & National Security Projects.”

Total federal investment would be $137.5 billion. But he’s looking for the private sector to invest a similar amount.

The website lists the number of job years (one job year is one person working for one year) that would be created. Direct job years would be 193,350, and there would be an additional 241,700 indirect job years created.

The list of projects is impressive and covers U.S. infrastructure from A to Z.

Here are some of the highlights:

  1. Twelve road and bridge projects. Most of the bridge projects are replacements of existing structures that are some of the worst in the nation in terms of condition.
  2. Seven grid upgrade and expansion projects. Many are necessary to deliver clean, renewable wind energy from the Midwest to load centers in California, Nevada and the Southeast.
  3. An energy storage project. Concerned over power blackouts, the California Public Utilities Commission is expediting the construction of energy storage systems in critical locations.
  4. Upgrades to three U.S. airports. The St. Louis, Seattle and Kansas City airports are all due for major upgrades and expansions. And there’s $10 billion in the kitty to transform the U.S. air traffic control system from radar to satellite-based tracking.That alone would increase the available number of flights by 50%. It would also greatly increase the safety of American air travelers.
  5. Eleven major rail and transit projects. About half are upgraded stations to reduce congestion. The rest are either new or upgraded rail lines. The heavily traveled Washington, D.C., to New York City Amtrak commuter line is on the schedule.

In addition to the reinstated Keystone and Dakota Access pipelines, the list includes the Atlantic Coast Pipeline. This natural gas pipeline will provide utilities in Virginia and North Carolina with natural gas from Pennsylvania’s Marcellus Shale.

Virginia and North Carolina are also adding natural gas-fired generating capacity. The cost of the project is $5 billion, and it will create 10,000 direct job years.

The rest of the list includes waterway dredging and widening, lock replacements on the Ohio River shipping channel, and miscellaneous other dam and waterway improvements.

This is all good news for infrastructure investors. And it gets even better…

The Democrats Have Their Own Plan

Infrastructure spending has support from both parties. In fact, the Senate Democrats, led by Chuck Schumer, have their own infrastructure plan.

The “Blueprint to Rebuild America’s Infrastructure” touts it will create more than 15 million jobs. It will also spend $1 trillion, but that will all come out of the U.S. Treasury (your pockets).

The Democrats’ plan addresses everything Trump’s plan does and a lot more. There’s just one problem: the number of jobs created.

The Democrats’ plan claims it will create 15 million new jobs over the next 10 years. Based on job years, Trump’s plan would create a total of 43,500 direct and indirect jobs over the same time frame.

It’s hard to pit one plan against the other. I believe the Democrats are vastly overestimating the number of jobs their plan creates.

On the other hand, I believe Trump is underestimating the number of jobs his projects will create. The real question is what will happen to the Democrat’s proposal.

Trump may surprise Republicans and add some of the Democrat’s line items to his plan.

The Surefire Investment Angle

Regardless of how the plan transforms, the U.S. is going to be spending a boatload of money on infrastructure. Nearly every infrastructure project and category mentioned needs one key ingredient to get started.

I’m talking about concrete and the cement used to make it. Cement is the ultimate infrastructure pick-and-shovel play.

U.S. cement stocks had a banner year in 2016. For instance, Eagle Materials Inc. (NYSE: EXP) was up 97% over the last 12 months.

Eagle Materials makes cement, gypsum wallboard, recycled paperboard, and proppants for oil and gas fracking. It’s currently trading at a reasonable P/E ratio of 25.5, given its growth last year.

There are a number of other companies competing with Eagle Materials. However, I like the company’s diversified business model.

The bottom line is this: For the next four years – and probably longer – we are going to see hundreds of billions spent on infrastructure improvements. Regardless of how we end up paying for it all, we know we’re going to need lots of cement to get it done.

You should position your portfolio accordingly.

Good investing,

Dave