Infrastructure stocks are back in the headlines. All after the train derailments in Ohio, for example, which released toxic chemicals. In fact, it’s accidents like this that are raising concerns about the quality of U.S. infrastructure quality, which could lead to big requests for new funding. So far, the $1 trillion bipartisan infrastructure bill was passed in 2021 to fix infrastructure-related problems in the coming years. With infrastructure back in the spotlight, we will likely see even more investments in America’s infrastructure over the coming years. That being said, I believe these three infrastructure stocks will make the most of it when that happens:
Infrastructure Stocks: Union Pacific (UNP)
With the focus on rail, investors should not ignore Union Pacific (NYSE:UNP)—America’s largest rail pure-play company with the second largest rail network at 32,000 miles. Union Pacific is among the least risky company you can invest in, as the company has a robust share repurchase program and generates significant amounts of cash. Last year, operating cash was $9.4 billion, and the company spent $6.3 billion in share buybacks. Union Pacific’s 2.56% annual dividend is the icing on top, on which it spent $3.2 billion.
The company’s extensive rail network also means that the government is providing substantial subsidies. The company called the 2021 Bipartisan Infrastructure Bill a “big win,” and I’m sure that more big wins will come in the future as only $66 billion of the bill is allocated to rail, a majority of which is for passenger rail.
Furthermore, Union Pacific is an important company for the U.S. economy. A third of all U.S. exports are also freight-related, and freight companies not only boost the economy and create a lot of jobs but also save taxpayers money by investing an average of $20 billion per year on their own infrastructure. With that in mind, I see UNP stock as a safe haven with considerable long-term potential.
Infrastructure Stocks: Carlisle Companies (CSL)
Carlisle Companies (NYSE:CSL) is a diversified manufacturer that produces diverse products in various industries, including construction, aerospace, and defense. The company’s construction materials segment is particularly well-positioned to benefit from the infrastructure plan, which includes investments in roads, bridges, and other public works.
This company may not directly get subsidies from the government. But up-and-coming infrastructure-related projects will give Carlisle Companies a big boost. For example, the government will spend $55 billion on expanding clean water access for Americans and $50 billion on disaster-proofing. Carlisle makes the necessary niche equipment for both of these instances. Furthermore, government-subsidized construction projects will also bring massive demand for the company’s products in the future.
Finally, Carlisle’s financials are very robust and has been beating estimates by a large margin. Annual profits more than doubled last year, while its net margin grew by 31.5% year-on-year in Q4. These metrics, combined with the infrastructure catalyst, make CSL a surefire stock in my book.
Infrastructure Stocks: Louisiana-Pacific (LPX)
One of the infrastructure stocks that recently caught my eye is Louisiana-Pacific (NYSE:LPX), after Berkshire Hathaway (NYSE:BRK-A, BRK-B) increased its positions in LPX by 21.5% in its Q4 13F filing. This company does have a very low valuation, but its poor financial performance is why I never gave LPX a second thought until now. The company is a leading building materials manufacturer focusing on the housing industry. As the Biden administration moves forward with its infrastructure plan, the housing market is expected to see a significant boost, which could translate to solid growth for Louisiana-Pacific.
The company’s top line went through a substantial expansion in 2021 as a booming economy added significant demand for housing. However, as growth has slowed, Louisiana-Pacific is struggling to compete with its 2021 metrics, hence the poor year-on-year financial outlook. However, I believe that in the long run, Louisiana-Pacific can roar back as the economy recovers. It’s a risky bet, but the current entry point is excellent once the growth premium returns. The Altman-Z score of the company also suggests no bankruptcy risk.
On the date of publication, Omor Ibne Ehsan did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.