U.S. Infrastructure development is front and center in the national conversation. After many years of stagnation, the United States seems to be moving toward meaningful infrastructure spending. On March 31st, the Biden Administration announced the American Jobs Plan. The plan seeks to revitalize the country’s backbone through sweeping federal spending across major infrastructure areas. These include components of physical infrastructure like roads and bridges, ports and waterways, buildings, and public transit; as well as next-gen areas like clean energy and related CleanTech, modernized water utilities, and digital infrastructure. 

The Jobs Plan is currently the subject of spirited debate in Washington as members of both parties negotiate the specifics of what would be drafted into law. While it is uncertain how closely any legislation might mirror the Jobs Plan, we expect a significant public spending bill to pass in 2021, funneling billions of dollars to U.S. infrastructure-exposed companies. This includes companies involved in construction and engineering services, products and equipment, raw materials and composites, as well as industrial transportation.

U.S. Infrastructure development is front and center in the national conversation. After many years of stagnation, the United States seems to be moving toward meaningful infrastructure spending. On March 31st, the Biden Administration announced the American Jobs Plan. The plan seeks to revitalize the country’s backbone through sweeping federal spending across major infrastructure areas. These include components of physical infrastructure like roads and bridges, ports and waterways, buildings, and public transit; as well as next-gen areas like clean energy and related CleanTech, modernized water utilities, and digital infrastructure. 

The Jobs Plan is currently the subject of spirited debate in Washington as members of both parties negotiate the specifics of what would be drafted into law. While it is uncertain how closely any legislation might mirror the Jobs Plan, we expect a significant public spending bill to pass in 2021, funneling billions of dollars to U.S. infrastructure-exposed companies. This includes companies involved in construction and engineering services, products and equipment, raw materials and composites, as well as industrial transportation.

• Buildings: Produces equipment and components used in electrified buildings and structures across most sectors, from residential to commercial and industrial. These include products related to electrical transmission, permanent/temporary lighting, and improving energy efficiency, as well as those used in building construction and engineering projects.
• Clean Energy & CleanTech: Manufactures products used in renewable energy projects. This includes components used in renewable electricity generation and transmission, as well as in construction and installation of renewable energy sources. Hubbell also manufactures electrical products used in utility-level power distribution including smart grid components.
• Digital Infrastructure: Offers equipment and components used in data centers and telecommunications infrastructure. These products include cables, connectors, and devices used in data transmission and electrical transmission, as well as equipment like server racks, wall mounts, and cable management systems. 

Products and equipment companies like Hubbell could benefit from broad investment in U.S. infrastructure. The Jobs Plan features over $300B+ of spending related to clean energy and CleanTech. Hubbell’s electrical product offering would position them to benefit from such spending. Though this portion of the Plan is a subject of great debate in Washington, less contested and similarly massive spending on buildings and digital infrastructure could also translate to revenues for Hubbell. In our view, Hubbell’s 92% revenue exposure to the U.S. and close relationship with construction engineering companies like Quanta Services adds credence to their ability to capture infrastructure revenues.

• bridges. Engineered structural mesh, another WWR product, distributes weight evenly throughout concrete, fortifying weight-bearing infrastructure like tunnels and bridges. Insteel also sells drawn steel wire with a multitude of applications including use in railroads.
• Water Utilities: Offers concrete pipe reinforcement as a part of its WWR offering. This steel wiring reinforces concrete piping used for wastewater collection and management, as well as in irrigation projects.

Raw materials and composites companies like Insteel provide the critical ingredients that form physical infrastructure assets. Buildings, transportation, and water utilities are likely to feature welded wire reinforcement and other steel wire reinforcement products, as is standard. A new emphasis on longevity and resilience could drive further usage of these products as infrastructure is built or retrofitted to withstand extreme weather events and the test of time. Insteel could be particularly well-positioned to benefit from this spending, considering its 99.5% revenue exposure to the U.S. 

Union Pacific is an industrial transportation company that operates the largest railroad network in the United States, spanning more than 50K miles across 23 states. They serve clients across most sectors, shipping construction products, industrial chemicals, raw materials and composites, energy, and food across the western U.S. Like many industrial transportation companies, Union Pacific’s services go beyond the reach of their railroads and include door-to-door and last mile delivery. 

In our view, industrial transportation companies like Union Pacific are essential enablers of U.S. infrastructure development. They are the companies that bring the raw materials and composites and the products and equipment that make up infrastructure to construction sites. Infrastructure development often involves building new infrastructure in previously hard to reach places – this is a challenge for those initially building this infrastructure. Door-to-door industrial transportation services help solve these logistical challenges and improve the efficiency of construction and engineering companies.

Investing involves risk, including the possible loss of principal. Narrowly focused investments typically exhibit higher volatility. Investments in infrastructure-related companies have greater exposure to the potential adverse economic, regulatory, political and other changes affecting such entities. Investment in infrastructure-related companies are subject to various risks including governmental regulations, high interest costs associated with capital construction programs, costs associated with compliance and changes in environmental regulation, economic slowdown and excess capacity, competition from other providers of services and other factors. PAVE is non-diversified.