Three major pieces of legislation in the past couple of years have set the stage for significant investments in various U.S. infrastructure projects, points out Fidelity's Sammy Simnegar, with companies in the industrials and energy sectors likely to be the biggest beneficiaries.
"One of my primary strategies in the current uncertain economic environment is to invest in companies that appear set to benefit from major increases in corporate or federal spending—in other words, to follow the money," explains Simnegar.
As an investor, Simnegar's investment approach is highly flexible, giving him the ability to invest in both domestic and foreign stocks across all market capitalizations and styles. Furthermore, he favors high-quality growth stocks benefiting from long-term megatrends, as well as what he refers to as the three "B's"—brands, barriers to entry, and "best-in-class" management teams.
The Infrastructure Investment and Jobs Act, passed in late 2021, contains an estimated $550 billion in new spending, touching nearly every area of infrastructure, including transportation, water, energy, and broadband, as well as the resilience and rehabilitation of our nation's natural resources, according to Simnegar.
The CHIPS and Science Act, signed into law in August 2022, allocates $280 billion to bolster U.S. semiconductor capacity and support related research and development.
The last of the three key pieces of legislation is the Inflation Reduction Act, or IRA, also enacted in August 2022. Simnegar states that this bill will invest roughly $369 billion in energy security and climate change programs over the next 10 years.
Within the industrials sector, Simnegar believes that a number of capital goods companies are especially well-positioned to benefit.
For example, he cites Quanta Services—a construction & engineering services provider focused on upgrading and improving the electrical grid against weather damage—which he believes stands to benefit from a major, multiyear initiative announced in 2021 by California utility Pacific Gas & Electric to move 10,000 miles of power lines underground in order to help reduce the risk of major wildfires and address other potential risks associated with climate change.
Elsewhere, utility firm NextEra Energy, a leader in renewable energy, also appears to be a notable beneficiary of the IRA, as does solar panel manufacturer First Solar.
As of May 31, Fidelity® Magellan® ETF, managed by Simnegar, held notable stakes in Quanta Services, Ingersoll Rand, United Rentals, and Eaton, among other firms he expects to potentially capitalize on these key spending initiatives.
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