On Monday, June 28, I’ll be adding shares of Martin Marietta Materials (MLM) to my Jubak Picks Portfolio to increase my exposure to the infrastructure sector after the Thursday, June 24, announcement at the White House of a bipartisan infrastructure deal. You should think of this producer of construction aggregates–used in highways, for example–as a version of aggregate producer Vulcan Materials (VMC) with a different regional profile. Whereas Vulcan is strongest in the Southeast and Texas, Martin Marietta has just acquired the assets of Heidelberg Cement in Arizona and California. (Because of their weight and bulk aggregates tend not to be shipped very far and local producers have a definite price advantage.)
I added Vulcan Materials back on March 1, 2021 for two reasons. First, increased spending on local, state and federal governments on hardening and raising infrastructure to cope with the effects of climate change, and second, the prospects of increased infrastructure spending by Washington. The shares are up 6.5% since that pick.
The infrastructure deal announced yesterday is, so far, very short on details. The package is $974 billion over five years with about $579 billion of that new money. Spending priorities, according to the Washington Post, include $125 billion for roads, highways, bridges, ports and waterways. (That’s probably on top of tens of billions in a separate transportation bill moving through Congress.) Close to $100 billion is allocated for for clean-energy-related projects, but the deal does not include the Biden administration’s plan for $300 billion in tax credits for renewable energy projects and it lacks a clean energy standard requiring utilities to obtain a certain percentage of their power from renewable sources. The biggest part of that clean-energy spending is $73 billion for “power infrastructure, including grid authority” to update and expand the country’s electrical grid. The deal also includes $7.5 billion for electric vehicle chargers, which the White House says “will accomplish the president’s goal” of building 500,000 electric vehicle charging stations, plus $7.5 billion for “electric buses/transit.” That funding appears to fall below the administration’s plan to electrify 20% percent of the nation’s school buses.
For more on my other infrastructure picks see yesterday’s YouTube video “5 Picks for an Infrastructure Deal” with recommendations on Caterpillar (CAT), Deere (DE), United Rentals (URI) and Vulcan Materials (VMC).
My target price for Martin Marietta is $380, although I’m likely to raise that target if the infrastructure deal looks to be making decent progress through the Senate. The stock pays a 0.64% dividend.
Full disclosure: I own shares of Deere in my personal portfolio.
