5 Best Infrastructure Stocks to Buy in July 2021

Revamping America’s infrastructure was among the promises that Joe Biden made in his election campaign. The infrastructure bill has so far failed to see the light of the day. However, the hopes are now high that the bill will get passed.

The massive investments into infrastructure will help boost demand for several US companies. What’re the five best infrastructure stocks that you can buy in July 2021 as infrastructure plans take shape?

1. Nucor (NUE)

Nucor is the largest US-based steel company and is the leading rebar supplier. The products are used in non-residential construction and their demand should rise on higher infrastructure investments. Nucor has strong margins throughout the cycle unlike some of its peers. The company has a strong balance sheet with investment-grade credit ratings.

NUE is a good infrastructure stock to buy

NUE is a good play on the infrastructure story. The company has delivered good returns across the steel cycle and is also outperforming most peers in 2021. It has a history of investing in downcycles and these investments pay off in the upcycle. The company is investing in new plants and these would add to its topline as well as the bottomline. Nucor has been posting record earnings amid the steel supercycle and higher infrastructure investments might lead to a further rise in US steel prices.

Nucor has found strong support at the 100-day SMA (simple moving average) and has also crossed above the 50-day SMA which is a bullish technical indicator. The stock has a 14-day RSI (relative strength index) of 58 which indicates neither overbought nor oversold positions.

Nucor trades at an NTM (next-12 months) EV-to-EBITDA of 3.9x which looks attractive. The stock’s median target price of $110 implies an upside of 8.1% over the next 12 months.

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2. Vulcan Materials (NYSE: VMC)

Vulcan Materials is the largest producer of construction aggregates in the US and would be the biggest beneficiary of higher infrastructure investments. The company gets around three fourth of its revenues from aggregates. The company’s revenue mix is diversified between private and public sector buyers.

VMC looks like a good infrastructure stock

VMC stock is up 26% so far in 2021 amid the boom in housing markets. The stock could rise further on higher infrastructure investments. The stock is looking good on the charts also and trades above the 50-day, 100-day, and 200-day SMA. The 12,26 MACD (moving average convergence divergence) also gives a buy indicator. However, it could be getting near the overbought zone with a 14-day RSI of 64.

Meanwhile, Wall Street analysts have a mixed rating on VMC stock. Of the 21 analysts polled by CNN Business, only nine rates the stock as a buy while 11 rate it as a hold. Only one analyst has a sell or equivalent rating on the stock.

Its median target price of $195 implies an upside of 6.1% over current prices. Its lowest target price is $156 which is a discount of over 12% while the highest target price of $220 is a premium of 19.6% over current prices.

That said, VMC could be among the major beneficiaries of higher infrastructure investments. While the stock trades at an NTM EV-to-EBITDA of 18.5x, which is higher than its historical multiples, the premium is justified considering the current uptrend.

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3. Freeport-McMoRan (NYSE: FCX)

FCX is the world’s largest publicly traded copper miner and also produces gold and molybdenum. The company’s mines are spread across North America, South America, and Indonesia. Copper demand and prices might rise on higher infrastructure investments especially if they are channelized in the renewable energy sector which has a higher copper intensity.

Freeport-McMoRan has high quality and low-cost portfolio of copper assets spread across stable geographies. The company is ramping up production at the Grasberg mine where the underground operations are now scaling up. The rising demand for electric vehicles also bodes well for FCX stock.

FCX looks like a good infrastructure stock to buy

Copper prices are a play on the global economy which is currently in an uptrend. Higher infrastructure investments in the US would also buoy demand for the metal. The stock is looking bullish on the charts also and has crossed above the 50-day and 100-day SMA. Copper prices have recovered from their recent lows which has helped FCX stock recoup some of its recent losses.

FCX stock trades at an NTM EV-to-EBITDA of 6.2x. The company’s earnings are expected to rebound in 2022 as it scales up copper and gold production. The stock’s median target price is $44.50 which implies an upside potential of 16.5% over the next 12 months. Overall, FCX looks a good play on the green energy transition as well as higher infrastructure investments.

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4. Alcoa (NYSE: AA)

Alcoa is the largest US-based aluminum producer and among the major alumina and bauxite producers globally. The company could be among the beneficiaries of higher infrastructure investments in the US as it would help lift sentiments as well as aluminum demand. The aluminum markets are looking strong globally as China has closed down some of its polluting capacity. The country’s aluminum exports have been the biggest challenge for producers globally but things are changing now amid the curtailment of capacity in the country.

Goldman Sachs is bullish on AA stock

Goldman Sachs is bullish on Alcoa stock and added it to its conviction list earlier this month. “In light of our positive aluminum outlook, we view Alcoa as well positioned to benefit from our higher price expectations, underpinning strong free cash flow generation and rapid deleveraging,” it said in a note

Alcoa has a median target price of $46.50 which is a premium of 16.5% over current prices. The stock has eight buy and five hold ratings. To sum it up, as the largest US-based aluminum producer with integrated operations, AA looks like a good stock to buy and play the infrastructure story. The stock looks bullish otherwise also considering the commodity supercycle.

AA stock looks attractive based on its NTM EV-to-EBITDA multiple of 3.6x. The company continues to streamline its portfolio which could add long-term value for investors.

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5. Caterpillar (NYSE: CAT)

As the supplier of construction and mining equipment, Caterpillar would also benefit from higher infrastructure investments. The stock is up 17% so far in 2021 and could continue its good run in the medium term.

CAT looks a good play on both mining and infrastructure

CAT stock could be a good play on both the mining and infrastructure story. The stock is looking mixed on the charts. While it has found support at the 200-day SMA, it is languishing below the 50-day and 100-day SMA. The 14-day RSI indicates neither overbought nor oversold positions. CAT stock trades at an NTM EV-to-EBITDA multiple of 15.9x which is higher than the historical averages. However, given the revival in end-user industries, the premium looks justified.

Wall Street analysts have a mixed rating on CAT stock. Of the 26 analysts polled by CNN Business, 11 rate the stock as a buy while 12 rate it as a hold. Three analysts have a sell or equivalent rating on the stock.

Its median target price of $245 implies an upside of 15% over current prices. Its lowest target price is $125 which is a discount of over 41.3% while the highest target price of $303 is a premium of 42.3% over current prices.

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