It's never a good idea to make investments trying to time some short-term event. But investing in proven and successful companies with bright futures that might have an additional catalyst coming isn't the same thing.
Many investors have been watching the progress in Congress of a potential new federal infrastructure package. Politicians have been doing what they always do -- playing politics -- and a vote on the bipartisan bill, which has already been passed by the Senate, has been delayed in the House of Representatives. That vote is now scheduled for the end of October.
The three investments below make great long-term holdings regardless of whether the new bill passes. And buying them this month could provide an additional boost if that federal infrastructure investment materializes.
Solar panels on a roof. Image source: Getty Images.
1. Honeywell: A backbone of industry
Honeywell International (HON 0.53%), a conglomerate that has been around for more than a century, works in industries including aerospace, manufacturing, and energy solutions for buildings, supporting sustainability and energy efficiency for its customers. With the stock relatively flat year to date, now is a good time to consider an investment in a company that would benefit from a thriving manufacturing and industrial base that the new infrastructure package would help support.
Honeywell struggled through 2020 with pandemic-affected organic sales declining 11% compared to 2019. By the second quarter of 2021, however, the company was back on track and reported a jump of 15% in sales versus the prior-year period. It's benefiting from developments in sustainable aviation fuel (SAF) and building projects and services. In its second-quarter conference call for investors, CFO Greg Lewis highlighted growth in its performance materials and technologies (PMT) segment. For example, safety and productivity solutions sales were up 35% organically despite supply chain constraints.
Those strong results prompted Honeywell to increase its full-fiscal 2021 guidance for sales, adjusted earnings per share, and free cash flow for the second time this year. That confidence stems from growth areas like Honeywell Forge, the company's software business aimed at improving sustainability and energy optimization in projects such as commercial buildings.
The company also is looking to develop SAFs in its aerospace segment. In September, it announced a joint investment with United Airline Holdings to produce SAF at scale from biomass materials, using Honeywell's Ecofining process, which converts non-edible natural oils and animal fats to green fuel.
With its business touching so many aspects of industry and manufacturing, an investment in Honeywell is an investment in infrastructure. With shares nearly flat year to date and paying a dividend yielding above 1.7%, now is a good time for long-term investors to consider adding the stock as a core holding.
A Nucor steel mill. Image source: Nucor.
2. Nucor: A far-reaching steel supplier
As North America's largest steel and steel products company, Nucor (NUE +0.29%) is at the forefront of any conversation related to infrastructure projects. The company's products are crucial for the construction of roads, bridges, and buildings; automotive and heavy-duty vehicle manufacturing; and residential uses such as appliances, and heating, ventilation, and air-conditioning (HVAC).
Even without additional infrastructure spending, Nucor keeps setting new earnings records. The company expects its third-quarter earnings report on Oct. 21 to include the third sequential quarterly record. It sees growth continuing as well. In its third-quarter guidance, it said, "Our internal business units' forecasts suggest that our fourth quarter of 2021 results are likely to continue the trend of exceptional performance we have seen so far this year." The likely results will be fiscal-year earnings that surpass the previous record year by more than 200%.
The success comes as steel prices remain high, and customer demand is strong in virtually every aspect of its business. Nucor is capitalizing on the boom by investing in growth, including a $1 billion acquisition of an insulated metal panel business and a recently announced $2.7 billion state-of-the-art steel mill. These projects aim to meet the need for energy efficiency in commercial buildings and automotive products as companies like General Motors move toward electrification.
To support that growth, Nucor just announced the launch of the industry's first net-zero-carbon steel product. GM will be the first customer to receive Nucor's Econiq, which the company said will be available across its steel products. In addition to all of its steel being fully recyclable, Econiq will be produced using renewable energy from power purchase agreements, in combination with carbon-offset purchases to result in a net-zero-carbon product as measured by scope 1 and scope 2 emissions. The company has also said separately it will publicly disclose and reduce scope 3 emissions, which are indirectly impacted by the company through its supply chain.
The company's earnings records may not continue through next year if steel prices back off recent highs. But demand looks to remain strong, and unless there is a full crash in the commodity, prices and profits should settle at sustainably high levels. Combine that with 48 years of consecutive dividend increases (with the 49th likely coming in December), and Nucor looks to be a long-term holding that should provide steady income and growth as its investment projects continue to come on line.
3. SPDR S&P Kensho Intelligent Structures ETF: A way to spread your bets
SPDR S&P Kensho Intelligent Structures ETF (SIMS 0.35%) is an exchange-traded fund that provides a way to buy into every aspect of infrastructure with one investment. It is a passively managed fund that provides broad exposure by tracking an index of U.S.-listed companies with a focus on innovative infrastructure.
The fund is about four years old, has $52 million in assets under management, and comes with an annual expense ratio of 0.45%. Its annualized total return since inception was approximately 11.5% as of Sept. 30. As of Oct. 7, top holdings included large businesses such as HVAC company Carrier Global; Johnson Controls, a provider of building electronics technology; as well as water technology companies like Xylem and Evoqua.
But because the ETF also holds smaller companies focused on innovation, its average weighted market cap is a relatively low $26 billion. Holdings like Bloom Energy and ChargePoint Holdings have market caps of under $6 billion, and tend to be more volatile than larger companies. But Bloom's fuel cells and hydrogen fuels, and ChargePoint's network of electric vehicle charging stations figure to benefit from infrastructure spending and alternative-energy growth.
The fund comes with added risk due to the smaller and more-unproven technology companies it holds. But that risk might result in added reward down the road. The ETF could provide a balanced single investment for investors looking to take some added risk with a wide-ranging infrastructure investment.
