In recent weeks, investors have come across many headlines regarding President Biden’s push to make the US stronger through “The American Jobs Plan”. This plan is an investment in America that proposes to create millions of jobs, rebuild outdated infrastructure, and position the United States to better compete with China. This plan totals $2.3 Trillion, which is a notable amount that bucks a domestic investment trend that has fallen by more than 40 percent since the 1960s.
In this blog, we aim to identify investible themes that may receive a tailwind of momentum and capital from this proposed plan. Our discretionary PIM portfolio has already included some companies reflected in the initiatives mentioned below. Biden has laid out his vision and investors should pay attention.
Highways, Bridges, Transport
There will be a $621 billion investment in transportation infrastructure. Highlights include $20 billion towards repairing roads and bridges, $85 billion in modernizing public transit, $80 billion to improving passenger and freight rail service, and $25 billion in improving ports, waterways, and airports. A significant volume of construction materials such as concrete, sand and asphalt will be needed to upgrade and modernize these key areas. The railway companies involved in transporting these crucial materials could also stand to benefit.
Electric Vehicles (EVs)
The plan makes a direct point that the US is behind in EV adoption as the U.S. market share of plug-in EV sales is only one-third the size of the Chinese EV market. Biden hopes the remedy can be a $174 billion investment in the EV market. This investment involves retooling factories for EV production, spurring domestic supply chains of raw materials and consumers rebates and tax incentives to buy American-made EVs. The plan will also introduce grant and incentive programs to build 500,000 EV chargers across the country by 2030. The plan will also include replacing 40,000 diesel transit vehicles, electrifying 20% of school buses, and electrifying the federal fleet (which includes the US Postal Service). Overall, this investment will not only benefit auto manufacturers and suppliers of material inputs, but even utility holdings that participate in EV infrastructure can also benefit greatly.
Clean Drinking Water
President Biden’s plan will include a $111 billion investment to ensure clean, safe drinking water to all communicates. His plan proposes a replacement of 100% of the nation’s lead pipes and service lines through water system improvement grants. Water utility and infrastructure companies, in addition to companies involved with the supply of various water technologies like filtration equipment, water testing, and pumps, can also benefit.
High Speed Broadband
Biden plans to invest $100 billion in high-speed broadband internet as this has been recognized as a necessity for work, education, health care, and staying connected. He prioritizes broadband networks for rural areas and hopes to have broadband coverage reach every American. This investment will encourage cellular and broadband network companies to further expand their infrastructure and 5G networks.
Renewed Electric Grid
There is an allocation of $100 Billion towards the modernization of power generation and electric transmission. The plan involves bringing cheaper and cleaner electricity through a targeted investment tax credit that incentivizes the construction of high-voltage capacity power lines. It also proposes a 10-year extension and phasedown of a direct pay investment tax credit and production tax credit for clean energy generation and storage. Lastly, an immediate upfront investment of $16 billion will go towards plugging orphaned oil and gas wells and cleaning up abandoned mines. As such, independent power producers and renewable energy generation companies are positioned well to benefit.
Research & Development
President Biden proposes a $180 billion investment towards research and development (R&D). The investment will focus on fields like biotechnology and advanced computing and will serve towards upgrading laboratories and other research facilities. The plan also prioritizes climate-focused research to position America as the leader in climate science and innovation. Companies with business models focused on climate solutions, data processing, and artificial intelligence stand to benefit.
As one can see, this plan covers many different themes beyond the traditional infrastructure projects like roads and bridges. This plan further extends towards innovative industries including technology and renewable energy. Beyond the scope of this blog is the tremendous capital to support the social infrastructure of America including support for rural and disadvantaged communities. Some commentators believe this will be contested by Republicans and hence, the full spending plan may have difficulty passing. That being said, the topics mentioned above could secure bipartisan support and would benefit even if the agreed-upon spending plan is less than initially proposed.
Speak to your advisor on how you can add more exposure related to The American Jobs Plan. This is a very ambitious plan, yet we may just be at the beginning.