"If I had a hammer, I'd hammer in the morning ... I'd hammer in the evening ..."

Companies in the construction sector could be humming that tune soon should President-elect Barack Obama roll out legislation to stimulate growth in infrastructure.

The construction industry has been one of the largest victims of this recession, with an unemployment rate above 10% in October -- the most of any industry group. However, the ailing sector could see a reversal in fortune, as the industry expects a surge in public-works spending.

Former Clinton administration officials Mortimer Downey and Jane Garvey, who have been tapped to head up transportation issues under the Obama administration, have told local governments to position themselves for a public-works stimulus package, according to The Wall Street Journal. While there is a chance implementation could take a few years, it doesn't hurt to start researching companies that will benefit from such legislation now.

That said, how do you identify companies that will benefit from a boost in infrastructure spending? I put the Motley Fool's CAPS screener to work to identify construction champs like civil contractor Granite Construction (NYSE:GVA) and cement producer CRH (NYSE:CRH), which would be a more U.S.-focused play than the more global Cemex (NYSE:CX). CRH could turn out to be a major beneficiary of an infrastructure build-out, as the first ingredient is generally cement.

To find companies that will benefit from this scenario, I ran the CAPS screener using the following criteria:

  • Companies in the materials and construction industries.
  • Each had to have a minimum price of $5.
  • Four- or five-star ratings from our CAPS investment community.

During the first 20 months for which we have data, four-and-five-star companies have outperformed the market, with average annualized gains of 7% and 12% respectively.

Here are some other candidates that popped up:

Company

Market
Capitalization

Products

CRH

$11.8 billion

Cement, aggregates, asphalt, concrete

Fluor (NYSE:FLR)

$7.8 billion

Project management

Foster Wheeler (NASDAQ:FWLT)

$3.2 billion

Energy and pharmaceutical facilities

Granite Construction

$1.7 billion

Roads, highways, bridges

Headwaters (NYSE:HW)

$271 million

Construction materials, coal combustion, alternative energy

Layne Christensen

$342 million

Water infrastructure, mineral exploration, natural gas

LSB Industries (NYSE:LXU)

$164 million

Heating, air conditioning

RPM International

$1.7 billion

Paint, sealants, adhesives

Sterling Construction

$219 million

Transportation and water infrastructure

Data from Motley Fool CAPS and Yahoo! Finance.

If indeed President-elect Obama's stimulus plan will call for an infrastructure build-out to stimulate the economy, wouldn't it be great to have a list of stocks that could cash in on that? Motley Fool CAPS is ready to help you plan a list of construction stocks for your own portfolio build-out just in case such a policy bulldozes its way across the nation.

For Related Foolishness: