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The Top Infrastructure Play for Right Now

Infrastructure is the powerful but increasingly trite political term that keeps getting rolled out year after year – regardless of which party is in control of Capitol Hill or the White House.

However, right now, it appears that the US is going to get something done on infrastructure.

Well, at least US taxpayers will be paying for an allocation for infrastructure that should amount to some $110 billion for actual roads, bridges and other hard assets to be repaired, improved or potentially even built from scratch.

The US Senate has passed a resolution authorizing the spending. And the House has it now for consideration, and at some point it should come up for a vote. Since the Senate had both sides of the political aisle voting for it, it should eventually pass the House if and when it is allowed to come to the floor.

This is the closest we’ve come in years to a big infrastructure spending legislative act. And this will benefit a host of companies that provide must have equipment and supplies for a myriad of projects – many of which are already on the planning board.

This week in Top 5, we have a prime play for the infrastructure legislation that’s already getting benefits from private construction projects around the US, including for housing and some commercial projects.

Vulcan Materials Company

Vulcan Materials Company (VMC) is one of the primary suppliers of both aggregate (stone, gravel, sand and other materials) as well as asphalt components in the US market.

It processes raw materials from its sources to supply the needed stuff for roads and construction projects that run the gambit from base materials, asphalt as well as ready-mix concrete.

So, if you are contemplating a road, airport, rail station, shipping port or anything else that is genuine infrastructure, Vulcan is one of the primary, go-to companies for what you will need.

Its facilities are found around the nation, as shipping its products doesn’t really make sense for longer distances – being close to projects is key for this industry.

It has also been prolific at building out its capabilities, both from its own expansion as well as a series of acquisitions over the past decades. Again, this is an entrenched must use company for major projects.

Sales growth really took a big pause with the virus mess in 2020, but it has been coming back strongly in 2021 with the latest quarter reporting a gain of 2.91%.

Vulcan Materials Quarterly Sales Growth — Source: Bloomberg

The key to the company is that it is in a strong, prime market for overall construction – made even more compelling with the infrastructure legislation.

It’s not just making aggregate and related materials, as the company watches its costs. Margins are typically not great in this industry, but with the company’s real roots in the Ireland Family, it is always frugal.

This shows up in an impressive operating margin running at 18.40%. And in turn, this works to deliver a return on shareholders’ equity at 11.10%.

The company runs a tight ship with lots of cash and limited debt – so it’s credible and capable to expand as needed.

It even pays a little dividend at 0.80%.

Vulcan Materials Price — Source: Bloomberg

The stock has been on a roll – partially on the expectations for infrastructure spending. That got curtailed recently and in turn set up our trade for the shares for this week.

As you can see, the turn back to the upside is now getting underway.

The Trade to Make

The trade to make for Vulcan Materials is to buy the shares at market, as it’s crossed our buy price. Then, hold it for the target price of $182.65.

From the current price of about $178, it represents a potential cash gain on the shares of 2.6%.

This is a great opportunity for a quick gain right now, as Vulcan Materials is a top stock to buy right now in Top 5.

Keep on Trading,

Josh Martinez

Editor, Josh’s Top 5

P.S. This is a great pick, but it’s still only one out of my Top 5. To find out about the rest of the trades I’m recommending, complete with specific entry and exit points, you need to click here and join me on the Top 5 journey…

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