Dear Mr. Berko: Here's a list of eight infrastructure stocks that my stockbroker recommended because she believes that President Donald Trump will be spending trillions on much-needed infrastructure improvements. Please give me your thoughts on these issues, and I would also appreciate any investment thoughts you would have that would complement those my broker gave me. — LP, Kankakee, Ill.
Dear LP: Last month, engineering crews in California frantically rushed to make repairs to the Oroville Dam as over 200,000 Left Coast residents were forced to evacuate the area. As the nation's 84,000 dams continue to deteriorate, a hugely growing number of folks living downstream from other "damns" are facing similar risk. There are 594,000 bridges crossing highways, rivers, canyons and lakes. The American Road & Transportation Builders Association believes that half of those bridges must be repaired or replaced. There are tens of thousands of miles of defective water pipelines requiring immediate attention, causing an estimated 240,000 water main breaks per year. According to The Huffington Post, our drinking water infrastructure needs over $1 trillion of fix-it-now money to prevent another Flint, Michigan-type drinking water crisis. There are 1,237 contaminated city water sites, and thousands more will become evident next year. Nationally, our stormwater sewer systems are glaringly inadequate. In St. Petersburg, Florida, the sewers frequently overflow. Meanwhile, the off-putting noxious odors stinking up the city are becoming commonplace in other municipalities across the nation. It's estimated that we need 18,600 miles of new sewer pipelines immediately. There's over 4 million miles' worth of rural and state highways crisscrossing the U.S., and 70 percent of those roads need serious surgery. There are thousands of aging small airports, seaports, inland waterways, solid waste plants, power plants, mass transit systems that require attention and lots of money, and that translates to trillions of infrastructure dollars and possibly a much higher Dow Jones industrial average.
Yes, you can buy Chicago Bridge & Iron (CBI-$31), yielding 0.06 percent, Emerson Electric (EMR-$60), which has a 3.1 percent yield, Fluor Corp. (FLR-$55), yielding 1.5 percent, Astec Industries (ASTE-$63), with a 0.05 percent yield, Tetra Tech (TTEK-$41), yielding 0.09 percent, and three stocks with no dividends — Great Lakes Dredge & Dock (GLDD-$4.35), Cemex (CX-$8.65) and McDermott International (MDR-$6.75). Those eight issues are good recommendations by your broker and appear to be superior to the recommendations of other so-called professionals. This gal seems to have a good head attached to her neck, and I suspect that her recommended issues will perform well over the next couple of years. However, I'd like to add an exchange-traded fund called SPDR S&P Regional Banking (KRE-$57), which yields 1.4 percent.
Though the above stocks should participate in the rebuilding of our infrastructure, your good broker may have overlooked an obvious investment, and that's the banksters who run the nation's regional banks. All that repair, rebuilding and replacement will require funding, and that funding will derive from regional banks, which is why I recommend KRE, which owns a $3.6 billion portfolio of 43 regional banks across the nation. KRE owns stock in Regions Bank, BB&T, Fifth Third Bank, SunTrust Banks, Huntington Bancshares, PNC, M&T Bank, Zions Bank, Citizens Financial Group and others. These are the banks that will open millions of new business and personal checking accounts and make myriad loans to municipalities, contractors and subcontractors to finance equipment, materials, tools, stuff and things to facilitate infrastructure repair. KRE has no leverage and is considered a mid-cap value investment, and its active portfolio turns over about 86 percent a year. Bank stocks should flourish this year and next, as the Federal Reserve will probably raise interest rates twice in 2017. This will give KRE's portfolio excellent maneuvering room to grow net income, open more new accounts, issue new credit cards and make new personal loans, including auto and truck loans — all at higher rates, which should grandly grow revenues and earnings.
My recommendation is to invest $35,000 in the eight issues your broker recommended and invest the remaining $35,000 in KRE. Investing in both strategies will give you the maximum return on that $70,000 in the coming two to three years.
Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, FL 33775, or email him at [email protected] To find out more about Malcolm Berko and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate website at www.creators.com.