Six Ways to Cash in on Obama's Infrastructure Plan

The stock market rallied on Monday after Barack Obama unveiled his economic stimulus program. The president-elect promised to create the largest public works construction program since the inception of the interstate highway system a half century ago. The plan is designed to create millions of jobs while also providing a boost to the economy and improving the quality of life in the United States.

Obama’s infrastructure news may have sent a chill up the spines of some economists, but many investors are looking forward to the opportunities that will present themselves. Companies dealing with infrastructure may be the next big stocks in 2009 and beyond as this plan unfolds. So, what are some of the key stocks to watch?

A large part of Obama’s plan deals with constructing new roads and highways while building new schools and public structures. All of these projects require a commodity, which means that the prices of many commodities and their miners may rise. These companies include everything from fertilizer companies like Potash (POT) to coal companies like James River Coal Company (JRCC).

Construction companies will be the other large beneficiary of these projects. Companies that manufacture construction and mining equipment, like Caterpillar Inc. (CAT) and Deere & Company (DE), stand to rise sharply as the need for equipment rises. Meanwhile, specialty builders like Vulcan Materials Company (VMC) and Cemex (CX), may also see sharp gains.

So, what’s the best way to play these companies? Many investors are turning to long-term stock options called LEAPS (or long-term equity anticipation securities) to best capitalize on the trends with limited risk. These options give investors the right to purchase shares, often for up to two years, at a fraction of the cost of ownership. The result is increased leverage, lower cost, and the long timeframe desired.

See “Using LEAPS as a Stock Substitute” for more information on this strategy or visit LEAPSInvestor.com for information on LEAPS options.

Disclosure: No position in stocks mentioned.

Comments

[Stock Trade...:]

Take a look at JEC, an infrastructure engineering company.

2008 Dec 10 07:56 AM

[jsc173:]

All good guesses, but until the plans are formulated and the contracts are awarded, these are all shots in the dark.

E.g., who's to say Caterpillar will get a dime -- why not Komatsu?

2008 Dec 10 08:44 AM

[Ames Tiedeman:]

DE and CAT are must owns.

2008 Dec 13 12:11 PM