ETFs for Obama's Public Works Agenda

It won't take long for the pundits to start slicing and dicing Obama's new public works agenda to see which ETFs will benefit. Here's my short list:

Infrastructure and Construction: There are a number of good infrastructure ETFs out there, but most of them are global in scope. The global ones might benefit, but you have to guess that our public tax dollars will flow to U.S. companies. If you want an all-domestic infrastructure play, the closest you can get is the PowerShares Dynamic Building & Construction Portfolio (NYSEArca: PKB). It has some residential construction exposure, but not much.

A dark-horse candidate might be something like the Market Vectors Steel ETF (NYSEArca: SLX). SLX has simply been crushed this year, falling 70%. It's trading at 5X cash flows and 2X book value. Everyone thinks the steel industry is dying, so much so that credit insurance on the largest player (ArcelorMittal) is soaring. If Obama's public works push boosts marginal demand for steel, a fund like this could recover.

Energy Efficiency: The other big play here is energy efficiency. Obama's plan calls for a massive retrofit of government buildings to make them as energy efficient as possible. That seems like a nice fit for the PowerShares Cleantech Portfolio (NYSEArca: PZD), which holds a global portfolio of stocks that help companies and institutions conserve natural resources (and save money in the process).

Beyond that, a handful of sectors are already anticipating the next bailout shoe to drop, chief among them REIT ETFs, which soared last week on expectations that Congress will finally do something to spur new buying in the real estate market. By the time any official agenda passes, however, expect the benefits to be priced in here already (if they aren't already).

Comments

[Anthony Alfidi:]

Thinly sliced sector ETFs are a hard way to play something as broad as an "infrastructure" recovery, especially when they have non-US exposure as you noted above with PZD. A more targeted bet might be to identify any construction firms that made the right campaign contributions in 2008.

2008 Dec 08 06:33 PM

[Thomas Smic...:]

I do not see infrastructure ETFs (except water) that really meet Obama's general plan. A tidy basket of individual stocks selected purely for infrastructure needs appears best, imo. That said, the securities I wrote of in today's seekingalpha piece on this topic were up considerably. Collect the names now and pull the trigger on a downturn. I think if Obama told everyone to eat lamb tomorrow, slaughterhouses specializing in that cute, tasty product would rise dramatically at the opening bell. Beware the Obama touch for knee-jerk reactions and be patient.

2008 Dec 08 07:40 PM

[einniv:]

First Trust ISE Global Engineering (FLM) is another option. It is still kind of new so its trading volumes are not very high but it has a good selection of infrastructure companies.

Granite Constr Inc (GVA), URS, Aecom Technology Corp(ACM), Fluor (FLR), Jacobs Engineering (JEC), Quanta (PWR), KBR, Foster Wheeler (FWLT), Chicago Bridge & Iron (CBI)

2008 Dec 08 09:34 PM