04-05-2021, 01:11 AM
An investment that will benefit from the various parts of the infrastructure bill. C
<!-- SC_OFF --><div class="md"><p>If you are looking for an infrastructure investment look not further than $PAVE ETF. It’s holdings are well diversified across the physical, digital, and energy infrastructure found in the bill. And options are still very cheap at the moment.</p> <p>Here is everything you need to know about the etf from seeking alpha:</p> <p>The Global X U.S. Infrastructure Development ETF (PAVE) is in an excellent position to directly benefit from President Biden's American Jobs Plan that was announced on Wednesday in Pittsburgh, PA. The proposed plan targets over $1.4 trillion for direct investments into physical infrastructure including transportation, schools, hospitals, and buildings as well as for energy, water, and digital infrastructure. The PAVE ETF holds many of the companies that will provide the materials, tools, services, and components required for this infrastructure build-out and should handsomely benefit from it.</p> <p>INVESTMENT RATIONALE</p> <p>President Biden presented the American Jobs Plan (part of his "build back better" initiative) on Wednesday in Pittsburgh and the White House published a FACT SHEET on its website. In a nutshell, a broad summary of the infrastructure initiatives in the American Jobs Plan is shown below:</p> <p>PHYSICAL INFRASTRUCTURE:</p> <ul> <li>Transportation infrastructure (621B)</li> <li>Buildings, schools and hospitals (250+B)</li> <li>Infrastructure resilience (50B)</li> </ul> <p>ENERGY, WATER AND DIGITAL INFRASTRUCTURE</p> <ul> <li>Cleantech, clean energy, and related infra (300+B)</li> <li>Water Utilities (111B)</li> <li>Digital infrastructure (100b)</li> </ul> <p>In total, the aggregate spending targeted directly at these infrastructure projects is over $1.4 trillion. The investment thesis here is simple: find an infrastructure fund that can benefit directly from those investment dollars.</p> <p>Let's take a look at the PAVE ETF and see what its prospects are going forward.</p> <p>TOP HOLDINGS</p> <p>The PAVE Infrastructure Development ETF's Top-10 holdings can be found on Global X ETF website and equate to roughly 30% of what I would characterize as a moderately concentrated portfolio that holds a total of 101 companies.</p> <p>PAVE has ~$2.3 billion in assets, so even a 3.2% weight of #1 holding Deere (DE) results in a $80.5 million stake. Many investors would consider Deere and odd choice for an infrastructure ETF considering it is generally regarded as focused solely on agriculture. However, DE operates in three segments - one of which is its Construction & Forestry Segment. This segment manufactures machines for earth moving, road building, graders, excavators, material handling, crushers and screeners, and asphalt pavers. DE is up 178% over the past year yet has an estimated forward P/E of only 23.3x.</p> <p>The #2 holding with a 3.0% weight is motion control systems specialist Parker-Hannifin Corp. (PH), which operates a Diversified Industrial segment that provides sealing, shielding, vibration, and thermal solutions as well as filters, noise abatement, and contaminate removal systems for water, air, fuel, oil, and other liquids. PH is also up 170%+ over the past year, has a forward P/E=22.4x, and yields 1.1%.</p> <p>The Eaton Corp. (ETN) is the #3 holding and has 3.0% weight within the portfolio. Eaton pays a $3.04 annual dividend, yields 2.2%, and has a forward P/E=24.9x. The company is heavily involved in the power management sector and likely will provide many of the electrical components and assemblies needed to build out the electrical transmission and distribution infrastructure detailed in the American Jobs Plan's investments into Clean Tech and Clean Energy.</p> <p>The #4, #5, and #10 holdings are railroad companies Norfolk Southern (NSC), Kansas City Southern (KSU), and CSX Corp. (CSX). Along with #12 holding Union Pacific (UNP), these four holdings alone equate to ~11.5% of the entire portfolio. Obviously, this ETF is betting that these rail freight providers will be hauling much of the gravel, rock, asphalt, lumber, steel, and products and assemblies that will be needed to build out the infrastructure of roads, bridges, buildings, and energy and water systems as detailed in the AJP. These railroads will also benefit from "opening up" and a generally stronger economy</p> <p>Some of that has been fueled by the excellent progress the Biden administration and big-pharma when it comes to the vaccine rollout and, as a result, from general expectations that the U.S. economy is opening up fast and will see very strong growth in the 2H of the year. Meantime, Canadian Pacific (CP) recently offered to buy KSU for $25 billion, which has added some "merger mania" to the sector.</p> <p>Surprisingly, the fund does not hold Caterpillar (CAT). CAT is generally thought to be one of the main beneficiaries of an infrastructure bill. But considering that stock has doubled over the past year, perhaps the management team feels it is overvalued. But with a forward P/E=28.3x and a 1.8% yield, CAT seems to be an odd omission in my opinion.</p> <p>Looking through the rest of the portfolio (see the full list of holdings here), we find many of the companies that sell the raw materials (steel, aluminum, copper, lumber, asphalt, filters, etc.) needed to for as the basic building blocks for transportation, electrical, utility, and water infrastructure.</p> <p>PERFORMANCE</p> <p>PAVE ETF wins by a considerable margin over IFRA on a NAV basis and neither ETF pays that much in the way of income (0.64% and 1.4%, respectively). PAVE is ~9x the size of IFRA, which has ~$250 million in AUM.</p> <p>Over a shorter time-frame that encompasses the "year-of-covid-19" and the period when discussions about an infrastructure bill to get Americans back to work with good-paying jobs got serious, PAVE has also out-performed the IFRA ETF by a significant margin.</p> <p>FUND BASICS</p> <p>These metrics all come from the Global X PAVE ETF Webpage:</p> <p>Expense Ratio: 0.47% AUM: $2.3 billion P/E Ratio: 32.2x Forward P/E Ratio: 21.9x Price-to-Book: 3.6x 30-day SEC-yield: 0.64% Roughly 87% of the fund is invested in the Industrials and Materials sectors.</p> <p>RISKS</p> <p>Considering the strong rally the PAVE ETF has had over the past year in anticipation of the infrastructure bill, much has already been built into the price. That said, note the fund is not over-weight any high-flying clean-energy names and, despite the growth of some of these stocks, many still sell at very reasonable valuation levels - see the forward P/E's of some of the top holding discussed earlier.</p> <p>The biggest risk is getting a substantial the American Jobs Plan through Congress. It should get through the Democratically controlled House in roughly the same shape as presented. As we learned with the American Rescue Plan, despite the objections of some of the more progressive members of the Democratic Party, they have shown some level of pragmatism in that they know if the legislation doesn't get through the very narrowly controlled Senate, it won't matter what they pass in the House. Much is likely to depend on what Senator Joe Manchin (D-West Virginia) decides he will support as if history is any indication, the AJP will get zero Republicans votes, so the Democrats must get all 50-votes so that Vice President Harris can break the tie.</p> <p>I believe the Democrats will push the legislation through because a recent poll by Navigator recently found broad bi-partisan support (over 80%) for an infrastructure bill by American voters.</p> <p>TLDR: Summary & Conclusion</p> <p>For those investors that don't typically invest in the infrastructure sector (myself included) but want to have some exposure to where their tax dollars are going in the American Jobs Plan, the PAVE ETF seems like an excellent choice. The portfolio is full of solidly profitable companies that are reasonably valued and in an excellent position to benefit from the build-out of U.S. infrastructure. PAVE is a BUY.</p> </div><!-- SC_ON --> submitted by <a href="https://www.reddit.com/user/ralphsdiorama"> /u/ralphsdiorama </a> <br/> <span><a href="https://www.reddit.com/r/investing/comments/mk588x/an_investment_that_will_benefit_from_the_various/">[link]</a></span> <span><a href="https://www.reddit.com/r/investing/comments/mk588x/an_investment_that_will_benefit_from_the_various/">[comments]</a></span>Kind Regards R
<!-- SC_OFF --><div class="md"><p>If you are looking for an infrastructure investment look not further than $PAVE ETF. It’s holdings are well diversified across the physical, digital, and energy infrastructure found in the bill. And options are still very cheap at the moment.</p> <p>Here is everything you need to know about the etf from seeking alpha:</p> <p>The Global X U.S. Infrastructure Development ETF (PAVE) is in an excellent position to directly benefit from President Biden's American Jobs Plan that was announced on Wednesday in Pittsburgh, PA. The proposed plan targets over $1.4 trillion for direct investments into physical infrastructure including transportation, schools, hospitals, and buildings as well as for energy, water, and digital infrastructure. The PAVE ETF holds many of the companies that will provide the materials, tools, services, and components required for this infrastructure build-out and should handsomely benefit from it.</p> <p>INVESTMENT RATIONALE</p> <p>President Biden presented the American Jobs Plan (part of his "build back better" initiative) on Wednesday in Pittsburgh and the White House published a FACT SHEET on its website. In a nutshell, a broad summary of the infrastructure initiatives in the American Jobs Plan is shown below:</p> <p>PHYSICAL INFRASTRUCTURE:</p> <ul> <li>Transportation infrastructure (621B)</li> <li>Buildings, schools and hospitals (250+B)</li> <li>Infrastructure resilience (50B)</li> </ul> <p>ENERGY, WATER AND DIGITAL INFRASTRUCTURE</p> <ul> <li>Cleantech, clean energy, and related infra (300+B)</li> <li>Water Utilities (111B)</li> <li>Digital infrastructure (100b)</li> </ul> <p>In total, the aggregate spending targeted directly at these infrastructure projects is over $1.4 trillion. The investment thesis here is simple: find an infrastructure fund that can benefit directly from those investment dollars.</p> <p>Let's take a look at the PAVE ETF and see what its prospects are going forward.</p> <p>TOP HOLDINGS</p> <p>The PAVE Infrastructure Development ETF's Top-10 holdings can be found on Global X ETF website and equate to roughly 30% of what I would characterize as a moderately concentrated portfolio that holds a total of 101 companies.</p> <p>PAVE has ~$2.3 billion in assets, so even a 3.2% weight of #1 holding Deere (DE) results in a $80.5 million stake. Many investors would consider Deere and odd choice for an infrastructure ETF considering it is generally regarded as focused solely on agriculture. However, DE operates in three segments - one of which is its Construction & Forestry Segment. This segment manufactures machines for earth moving, road building, graders, excavators, material handling, crushers and screeners, and asphalt pavers. DE is up 178% over the past year yet has an estimated forward P/E of only 23.3x.</p> <p>The #2 holding with a 3.0% weight is motion control systems specialist Parker-Hannifin Corp. (PH), which operates a Diversified Industrial segment that provides sealing, shielding, vibration, and thermal solutions as well as filters, noise abatement, and contaminate removal systems for water, air, fuel, oil, and other liquids. PH is also up 170%+ over the past year, has a forward P/E=22.4x, and yields 1.1%.</p> <p>The Eaton Corp. (ETN) is the #3 holding and has 3.0% weight within the portfolio. Eaton pays a $3.04 annual dividend, yields 2.2%, and has a forward P/E=24.9x. The company is heavily involved in the power management sector and likely will provide many of the electrical components and assemblies needed to build out the electrical transmission and distribution infrastructure detailed in the American Jobs Plan's investments into Clean Tech and Clean Energy.</p> <p>The #4, #5, and #10 holdings are railroad companies Norfolk Southern (NSC), Kansas City Southern (KSU), and CSX Corp. (CSX). Along with #12 holding Union Pacific (UNP), these four holdings alone equate to ~11.5% of the entire portfolio. Obviously, this ETF is betting that these rail freight providers will be hauling much of the gravel, rock, asphalt, lumber, steel, and products and assemblies that will be needed to build out the infrastructure of roads, bridges, buildings, and energy and water systems as detailed in the AJP. These railroads will also benefit from "opening up" and a generally stronger economy</p> <p>Some of that has been fueled by the excellent progress the Biden administration and big-pharma when it comes to the vaccine rollout and, as a result, from general expectations that the U.S. economy is opening up fast and will see very strong growth in the 2H of the year. Meantime, Canadian Pacific (CP) recently offered to buy KSU for $25 billion, which has added some "merger mania" to the sector.</p> <p>Surprisingly, the fund does not hold Caterpillar (CAT). CAT is generally thought to be one of the main beneficiaries of an infrastructure bill. But considering that stock has doubled over the past year, perhaps the management team feels it is overvalued. But with a forward P/E=28.3x and a 1.8% yield, CAT seems to be an odd omission in my opinion.</p> <p>Looking through the rest of the portfolio (see the full list of holdings here), we find many of the companies that sell the raw materials (steel, aluminum, copper, lumber, asphalt, filters, etc.) needed to for as the basic building blocks for transportation, electrical, utility, and water infrastructure.</p> <p>PERFORMANCE</p> <p>PAVE ETF wins by a considerable margin over IFRA on a NAV basis and neither ETF pays that much in the way of income (0.64% and 1.4%, respectively). PAVE is ~9x the size of IFRA, which has ~$250 million in AUM.</p> <p>Over a shorter time-frame that encompasses the "year-of-covid-19" and the period when discussions about an infrastructure bill to get Americans back to work with good-paying jobs got serious, PAVE has also out-performed the IFRA ETF by a significant margin.</p> <p>FUND BASICS</p> <p>These metrics all come from the Global X PAVE ETF Webpage:</p> <p>Expense Ratio: 0.47% AUM: $2.3 billion P/E Ratio: 32.2x Forward P/E Ratio: 21.9x Price-to-Book: 3.6x 30-day SEC-yield: 0.64% Roughly 87% of the fund is invested in the Industrials and Materials sectors.</p> <p>RISKS</p> <p>Considering the strong rally the PAVE ETF has had over the past year in anticipation of the infrastructure bill, much has already been built into the price. That said, note the fund is not over-weight any high-flying clean-energy names and, despite the growth of some of these stocks, many still sell at very reasonable valuation levels - see the forward P/E's of some of the top holding discussed earlier.</p> <p>The biggest risk is getting a substantial the American Jobs Plan through Congress. It should get through the Democratically controlled House in roughly the same shape as presented. As we learned with the American Rescue Plan, despite the objections of some of the more progressive members of the Democratic Party, they have shown some level of pragmatism in that they know if the legislation doesn't get through the very narrowly controlled Senate, it won't matter what they pass in the House. Much is likely to depend on what Senator Joe Manchin (D-West Virginia) decides he will support as if history is any indication, the AJP will get zero Republicans votes, so the Democrats must get all 50-votes so that Vice President Harris can break the tie.</p> <p>I believe the Democrats will push the legislation through because a recent poll by Navigator recently found broad bi-partisan support (over 80%) for an infrastructure bill by American voters.</p> <p>TLDR: Summary & Conclusion</p> <p>For those investors that don't typically invest in the infrastructure sector (myself included) but want to have some exposure to where their tax dollars are going in the American Jobs Plan, the PAVE ETF seems like an excellent choice. The portfolio is full of solidly profitable companies that are reasonably valued and in an excellent position to benefit from the build-out of U.S. infrastructure. PAVE is a BUY.</p> </div><!-- SC_ON --> submitted by <a href="https://www.reddit.com/user/ralphsdiorama"> /u/ralphsdiorama </a> <br/> <span><a href="https://www.reddit.com/r/investing/comments/mk588x/an_investment_that_will_benefit_from_the_various/">[link]</a></span> <span><a href="https://www.reddit.com/r/investing/comments/mk588x/an_investment_that_will_benefit_from_the_various/">[comments]</a></span>Kind Regards R