The State of the Union and Infrastructure Stocks: Time to Make a Move

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If, as is being reported, President Obama makes the main focus of his State of the Union speech not the hot button, front of the discussion topics of debt, immigration and guns but instead the economy and infrastructure renewal in the United States, it will be a not-so-quiet statement that he's taking his second term seriously. More seriously than many of his supporters and detractors, frankly.

Infrastructure improvement and renewal should be one of the foremost priorities of any elected official right now. It's no secret that the infrastructure in the United States – the bridges, roads, dams and so forth – have been allowed to atrophy as national attention has been elsewhere. Billions, perhaps trillions of dollars worth of projects have fallen by the wayside. If the president is serious about proposing a new focus on such, it could have a serious impact on the country.

It could also have an impact on your portfolio. Infrastructure is, of course, an investment that brings returns at multiples of the original expense. But that doesn't mean you shouldn't try to profit from the actual construction itself. If you know where to go there'll be real money to be made by some firms – and some investors – if the president refocuses the country's strength on internal matters for a while instead of external.

URS (NYSE: URS)

URS does some serious infrastructure work. It's been consistently in the Top 100 federal contractors in the United States and also provides work overseas. If dams and other power-generating items are on the list for renewal or simply rebuilding, URS has to be considered in the mix to pick up some major dollars. The firm has bought some others lately and is interested in more. The stock has been up and down but generally flat. It's up $8 since November but it was down prior, so no love there. I think the market is a bit down on URS right now without sufficient cause. A buy here could have serious long-term payoff.

AECOM Technology (NYSE: ACM)

AECOM is a major player in both planning and executing major construction projects. Highways, airports, mass transit, you name it, AECOM can do it. There's no way the federal government makes rebuilding the nation a priority without AECOM getting a very nice slice of those contracts. The firm's earnings were down in the most recent quarter and that might put some people off. Despite that, the stock is still on the way up, gaining about 60% since November. I could wish it paid a dividend (don't I always) but otherwise, if there's infrastructure out there to be built, AECOM will cash in.

Jacobs Engineering (NYSE: JEC)

Pasadena-based Jacobs is an established player in terms of building and maintaining large projects. The firm just got a $2 billion renewal of the contract for the Johnson Space Center and reported a good first quarter. There's not a lot bad to report. Since June the firm's shares have climbed 38% and there's no reason to think that will stop. Major engineering projects are coming and I think Jacobs will do well. The market isn't yet overbidding JEC as its P/E is still sitting right around 15. If you're going to move, it's time.

KBR (NYSE: KBR)

KBR is a bit of an enigma to me these days. The firm's clearly got the skills and experience to go as far as it wants in major construction. It wins contracts but it came in with an EPS much lower than expected. Still, I think it'll do well, though perhaps not as well as some of the others listed here. KBR should be a back-up investment for you if, for some reason, you're prevented from picking up some of the others here. It does pay a 1.04% dividend, though. A nice little bonus that not all of the firms in the industry do.

The Shaw Group (UNKNOWN: SHAW.DL)

Be wary of just tracking the stock on SHAW. There's a big jump late last July that was inspired by the announcement that a takeover is under way. There have been issues about that but the stock hasn't crashed back to pre-announcement levels. Shaw is another firm that can build pretty much anything, so they'll have an opportunity to expand. Picking up shares right now might be difficult with the merger set for soonest, though. Keep an eye on it.

Predicting what Congress will do is always a challenge. There isn't enough bipartisanism in either chamber to outdo my two kids after they've been locked in the car on an eight-hour drive. Still, building roads, bridges and so forth? That brings a lot of jobs to districts. And that brings congressional votes. If the administration does want this to happen, and structures it right, there will be very few congressmen with the courage to vote 'NO' on jobs for their constituents. Here's hoping it happens.

Good luck!

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