Best Construction Stocks

With President Biden’s almost $1 trillion infrastructure plan advancing, construction stocks have come under the spotlight. In anticipation of the plan being approved, companies such as Caterpillar Inc. (NYSE: CAT) and Martin Marietta Materials Inc. (NYSE: MLM), among others, have made strong gains. 

You can invest in many different companies at a variety of levels in the construction industry, such as homebuilders, material suppliers and equipment manufacturers. Benzinga will take you through the best construction stocks to buy now.

Quick Look at the Best Construction Stocks:

• Caterpillar
• Beacon Roofing
• Sherwin-Williams Co.
• Nucor Corp.
• KB Home

Overview

Construction stocks tend to move with the overall state of the economy. During periods of economic downturn, the amount of business construction companies receive declines. However, during positive periods, when the overall economy is recovering or booming, construction companies will see a lot of work come their way. 

For example, you are more likely to buy a house when the economy is booming and your job is secure than when there is a recession and your job may be at risk.  

Construction companies, since the pandemic, have seen a lack of workers, with the Association General Contractors of America (AGC) stating that employment in June remained below the levels reached before the pre-pandemic peak in February 2020.

Also, watch out for demand related to the 5G industry. With huge investment going into 5G networks, construction demand from telecom customers should increase in the near future, which is an excellent sign for the construction industry.

So, where is the economy now? 

The COVID-19 pandemic had a significant impact, with job losses, businesses closing and travel almost grinding to a halt. Construction stocks took a hit at first, but housing demand during the pandemic — surprisingly — boomed in the U.S. and other parts of the world. This provided a great lift to the sector and stocks.

You’d be forgiven for thinking that these stocks would take a hit during the pandemic because the economy saw a drastic decline. But the housing market saw a boom, with richer Americans buying larger properties with more outdoor space. 

That benefitted construction stocks. While the market has cooled in the last month or so, as long as the economic recovery continues and the infrastructure plan is passed, the stocks should benefit.

Best Online Brokers for Construction Stocks

If the infrastructure plan is passed, we should see construction stocks continue to make gains as demand for those companies’ goods and services grows. 

When it comes to brokers, there aren’t any that particularly favor construction stocks. However, it’s usually best to invest in blue chip stocks that can ride out economic downturns. Luckily enough, the majority of brokers will provide these stocks on their platforms, but it is still important to choose a broker who best suits your needs. 

To help make your decision, we have compiled a list below of the best online brokers for construction stocks.

Features to Look for in Construction Stocks

1. Reliability: The last thing you want from a construction company is one that is unreliable and cuts corners. That could be extremely dangerous and risk people’s lives. A company that uses bad materials and equipment will also lose a lot of money in the long run. Therefore, when looking for construction stocks, you want to invest in a reliable name. 
2. Track record: Like the feature above, a reputable name in the construction industry will often lead to continued demand. A government or major telecommunications company giving out construction contracts will more than likely choose a company with a strong track record for quality and safety as there could be a major risk if something goes wrong.  
3. Financial strength: This is a key feature as construction projects often come with large up-front costs. The contractor will need to pay for things such as materials and machinery. Therefore, the company must be able to manage its expenditures and keep debt levels low. Otherwise, it could run into trouble.

Big Names are Best

As mentioned, when it comes to these stocks, you want to look for names that are synonymous with quality. Companies with a big name, good reputations and that pay dividends are best. A government or major construction project will need to work with names it can trust.

Look for value in those names and try to buy at levels where you believe the price is undervalued. Take a look at these stocks currently under $20. Value investing is an excellent way of building a steady income stream, but whatever your goal, make sure you understand the company first. Research, research, research is key. The more you know about a company and the industry it’s in, the better your investment decision will be. 

Frequently Asked Questions