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The Government’s Infrastructure Binge Is Coming. Finding Stocks to Play It Is Tricky.

Has the infrastructure trade run its course?

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Infrastructure stimulus and the transition to renewable-energy generation could provide a big boost to some stocks in 2023. Unfortunately, one of them won’t be around for investors to play.

That would be
Atlas Technical Consultants
(ticker: ATCX), which Barron’s recommended buying ahead of Congress passing the $1.2 trillion Infrastructure Investment and Jobs Act in late 2021, when shares were around $9.
which provides engineering and design services, inspection and certification of buildings and public works, and other construction-related services, benefited from the infrastructure-spending buzz in the following months: The stock rose to $13 by March 2022. Those gains didn’t last. By the end of the year, shares were below $6 as investors fretted over Atlas’ substantial debt load in a rising-rate environment.

But Atlas will have more plans and designs to review as stimulus-funded infrastructure projects start getting built in 2023 and 2024. These will eventually become finished projects that need annual inspections—some 70% of Atlas’ revenue—meaning recurring business for years.

Unfortunately, public investors won’t be along for the ride. On Tuesday morning, Atlas announced that it had reached a deal to be acquired by private-equity firm GI Partners for $12.25 per share in cash, valuing the company at about $1.1 billion, including debt.

There are plenty of other infrastructure-spending beneficiaries—though deciding which ones to buy is no easy task. The coming infrastructure stimulus isn’t a surprise, and many of the potential beneficiaries trade at premiums to their historical valuations.

That’s the case with the makers of bulldozers, backhoes, pavers, compactors, and other machinery that will do the heavy lifting, including
(TEX), and
(DE), a pick at the 2023 Barron’s Roundtable. All three stocks are sitting on double-digit gains since October. Companies that rent equipment, including
United Rentals
Herc Holdings
(HRI), and
WillScot Mobil Mini Holdings
(WSC), would be an option. But, once again, the stocks have run recently and there may be a better entry point ahead should markets pull back.

The companies that provide the sand, cement, and other materials for all the projects should also get a boost, one that will smooth out some of the usual economic cyclicality in their businesses. That should be good news for CRH (CRH),
Martin Marietta Materials
Vulcan Materials
Eagle Materials
(EXP), and
Summit Materials
(SUM). Unfortunately, the first major projects won’t break ground until later in 2023 or 2024, and that may be too late to offset some of the decline in demand from a softer housing market this year.

The law also includes investments in the U.S.’s power infrastructure, electric-vehicle charging stations, and rural broadband development, benefiting the contractors that will do the more specialized work in addition to the more commoditized paving and roadbuilding. Those include
Quanta Services
Jacobs Solutions
Dycom Industries
(DY), and
Sterling Infrastructure
(STRL), another 2023 Roundtable pick. We’re getting warmer now. These companies haven’t run as much, and some have barely run at all. Still, the businesses are labor- and energy-intensive, and investors will need to keep an eye on expense growth.

A better bet might be an exchange-traded fund that wraps the whole infrastructure theme together—such as
Global X U.S. Infrastructure Development
(PAVE). Its top holdings include steel maker
Nucor (NUE),
HVAC firm
Trane Technologies
(TT), electrical-grid components maker
(ETN), Deere, and Vulcan. Owning them all means that the risks should offset somewhat, limiting the downside, but still provide investors with exposure if the stocks continue to do well.

Or you can take your cue from Atlas—and consider the trade done.

Write to Nicholas Jasinski at


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